Laila Tjensvoll, December 13, 2019 3 min read
It’s always been said that in business, timing is everything. And that makes sense, most of the time. As Friday the 13th rolls around, we take a look at the superstitions, legends and myths around the world that still rule investment and finance – and how it can affect your business.
Scientists have been trying to explain the so-called “October Effect” in American investment markets for years. This phenomenon finds investors selling off their positions before May 1, holding onto their cash during summer months, then waiting until October is done and dusted to start buying again. There are several explanations for this, but the most common is that any self-respecting finance mogul knows October is historically a spooky month for stocks. The Panic of 1907 hit Wall Street in October, along with Black Monday and Black Thursday in 1929, leading to the Great Depression. This effect sends ripples across the sector in general, and less financial activity is expected in these months.
In the UK we’ve also adopted the “sell in May and go away” mentality, and according to a study conducted in 2002, it was found this effect dating back to 1694. So, if October is the unlucky month, then Friday the 13th must be the beacon of superstition. And does it affect our financial world? Well it actually might, but not in the way you think. Studies suggest that superstitious traders may be more inclined to sell on the 12th, and accordingly, prices should be higher on Friday the 13th. In stock trading, this effect is slowly dying out due to the widespread practice of automated trading, but in other areas of finance it’s worth remembering you might just be dealing with a particularly superstitious person holding the purse strings.
Venture Capital might be younger than the world’s great stock exchanges, but if they’re half as superstitious as their trading floor cousins it could be cause for pause. Markets miraculously show a consistent dip during full moons and a boost during the new moon – that is in each of the G7 but Norway. We’ve yet to look into what happens when Mercury is in retrograde.. And the financial world is seemingly a fan of many an omens, like the Hemline Index (indicating the better the times, the shorter the skirts), the Skyscraper Curse (claiming the taller building are, the closer the economy is to crash) and even “The Superbowl Effect”.
So we know what are considered unlucky in Western culture (number 13, broken mirrors, FCA investigations), but what about the rest of the world? A prominent superstition in Chinese culture is the number 8, where the pronunciation sounds similar to the word for “wealth”, “fortune”, and “prosper”. The number 4 on the other hand, sounds similar to the pronunciation of “death” and has been deemed unlucky. Investors have inherited this, and studies suggest that it’s being applied to the stock and housing markets. But it might also be something to consider if you’re planning on incorporating numbers into your company name.
So why does this matter to you as a founder? As the world becomes more globalised and companies aim to scale and establish themselves all over the world, it’s an indication of how important cultural knowledge and catering to specific markets can be. Marketing strategies, sales approaches and products may work in one culture, but fail in another. Take this example for 2016, where a swanky, expensive art piece of a black swan was installed to complement a high-fashion mall in China. Investors weren’t fans, as black swans are considered very bad omens.
As finance becomes more globalised, analysing exactly which powers rule that world is not only important but necessary. Are we implying that it’s wrong to have superstitions, or that everyone working in finance believes in them? Not even close! (Although some studies suggest high-pressured roles breed more superstition.) But investors are subject to both market forces and the whims of their colleagues and peers. It’s an industry where small drops can cause huge waves, so may Friday the 13th be a little reminder that it’s worth considering all the things that influence the world’s biggest money machines.
