Using a unique dataset from China spanning 2005 to 2023, we investigate how superstitious beliefs influence mutual fund managers’ risk-taking behavior and how this influence evolves over their careers. We find a significant 6.82% reduction in risk-taking during managers’ zodiac years, traditionally considered unlucky in Chinese culture. This effect is particularly pronounced among less experienced managers, those without financial education backgrounds, and those with lower management skills. The impact also intensifies during periods of high market volatility. Our findings challenge the traditional dichotomy between retail and professional investors, showing that even professional fund managers can be influenced by irrational beliefs early in their careers. However, the diminishing effect of superstition with experience and expertise suggests a gradual transition towards more rational decision-making. Our results provide insights into the process by which financial professionals evolve from exhibiting behavior akin to retail investors to becoming the rational actors often assumed in financial theory.

Using a large sample of US individuals, we show that individuals with higher levels of trust have lower likelihoods of default in household debt and higher net worth. The effect is driven by trust values inherited from cultural and family backgrounds more than by trust beliefs about others. We demonstrate a causal impact of trust on financial outcomes by extracting the component of trust correlated with early-life ex- periences. The effect of trust is more pronounced among females, those with lower education, lower income, lower financial literacy, and higher debt-to-income ratio. Further evidence suggests that enhancing individuals’ trust, to the right amount, can improve household financial well-being.

Using three natural experiments, we test the hypothesis that investor overconfidence produces overpricing of high idiosyncratic volatility stocks in the presence of binding short-sale constraints. We study three events: IPO lockup expirations, option introductions, and the 2008 short-sale ban on financial firms. Consistent with our prediction, we show that when short-sale constraints are relaxed, event stocks with high idiosyncratic volatility tend to experience greater price reductions, as well as larger increases in trading volume and short interest, than those with low idiosyncratic volatility. These results hold when we benchmark event stocks with non-event stocks with comparable idiosyncratic volatility. Overall, our findings suggest that biased investor beliefs and binding short-sale constraints contribute to idiosyncratic volatility overpricing.

Using the data of Chinese listed firms from 2003-2020, this study applies a System GMM estimation approach to document that high local government ecological concerns increase a firm’s stock price crash risk. This finding remains consistent after addressing endogeneity issues and undergoing robustness checks. This study also reveals that the implementation of the new environmental protection law in 2015 mitigates the relationship between local government ecological concerns and stock price crash risk. Further analyses indicate that stricter environmental regulation and high subsidies, as well as enhanced corporate social responsibility and governance, can effectively alleviate the adverse effect of local government ecological concerns on stock price crash risk. In addition, we note that the influence of local government ecological concerns on stock price crash risk is more significant in the eastern region, heavily polluting industries, and non-SOEs. Lastly, the research identifies two potential channels through which local government ecological concerns can impact stock price crash risk by reducing the quality of information disclosure and intensifying investor disagreement.

This paper represents the first attempt to show how heterogeneous shock experiences help explain the enduring scars on household future behaviors. Using a large-scale household survey with 15,652 observations combined with geospatial transportation big data, we identify a novel belief-updating mechanism through which crises may exert prolonged impacts on household asset allocation and consumption patterns. An increase in the duration of previous lockdown experience is associated with a 10.52% escalation in enhanced anxiety for future precautionary saving motivations. This experience-based learning perspective supports the resolution of long-lasting overreactions to negative shocks via belief revisions and extends to households’ consumption behaviors. The lingering effects continue to skew households' beliefs even when conditions improve. Additionally, households with different individual-based shock experiences may exhibit varying perceptions of external shocks, resulting in disparate belief revision processes.

This study investigates the relationship between investors’ prior gains or losses and their adoption of extrapolative beliefs. Our findings indicate that investors facing prior losses tend to rely on optimistic extrapolative beliefs, whereas those experiencing prior gains adopt pessimistic extrapolative beliefs. These results support the theory of motivated beliefs. The interaction between the capital gain overhang and extrapolative beliefs results in noteworthy mispricing, yielding monthly returns of approximately 1%. Motivated extrapolative beliefs comove with investors’ survey expectations and trading behavior, and help explain momentum anomalies. Additionally, households are susceptible to this belief distortion. Institutional investors can avoid overpriced stocks associated with motivated (over-)optimistic extrapolative beliefs.

This study investigates the relationship between investors’ prior gains or losses and their adoption of extrapolative beliefs. Our findings indicate that investors facing prior losses tend to rely on optimistic extrapolative beliefs, whereas those experiencing prior gains adopt pessimistic extrapolative beliefs. These results support the theory of motivated beliefs. The interaction between the capital gain overhang and extrapolative beliefs results in noteworthy mispricing, yielding monthly returns of approximately 1%. Motivated extrapolative beliefs comove with investors’ survey expectations and trading behavior, and help explain momentum anomalies. Additionally, households are susceptible to this belief distortion. Institutional investors can avoid overpriced stocks associated with motivated (over-)optimistic extrapolative beliefs.

America and China have different cultures. For example, Chinese culture emphasizes the group, while American culture emphasizes the individual. Chinese culture emphasizes integration, while American culture emphasizes analysis. In addition, there are differences in customs, religious beliefs, and nonverbal communication between the United States and China. This article examines the cultural differences between China and the United States in historical geography, traditional thought, cognitive systems, and language. In the following, I will explain and discuss the reasons for the cultural differences between China and America. The author hopes this article will be helpful for readers interested in cultural differences between China and the United States and global trade exchanges. [译]美国和中国拥有截然不同的文化。例如，中国文化强调集体，而美国文化则重视个体；中国文化注重综合，而美国文化则倾向于分析。此外，在风俗、宗教信仰以及非言语沟通方面，美国和中国之间也存在差异。本文从历史地理、传统思想、认知系统和语言等多个角度探讨了中美两国之间的文化差异。在下文中，我将解释并讨论中美文化差异产生的原因。作者希望本文能对那些对中美文化差异和全球贸易交流感兴趣的读者有所帮助。

The influence of religious beliefs on investment is interesting and important in literature. We use a large dataset with detailed information on the worship places of the five largest religious groups in China to study the relationship between local religious beliefs and individual financial decisions. We find that Buddhists, Taoists, Islamists, and Catholics are less likely to buy financial products on the financial market; Protestants tend to take risks compared to other believers. Chinese Protestants, unlike American Christians, seek more risk, while Catholics are risk-averse.

How do expectation biases causally affect households’ financial decisions? We exploit a unique setting and study the repayment decision in solar loans, in which households borrow to purchase and install solar photovoltaic (PV) systems. Electricity production – the benefit that solar panels generate – primarily depends on sunshine duration. This creates exogenous within-person across-period variation in recent signals that borrowers observe and thereby expectations of future electricity production. We find that a one-standard-deviation decrease in sunshine duration in the week right before the repayment date leads to a 20.8% increase of delinquency, even though deviated past sunshine duration does not predict that in the future. Survey evidence shows that agents make more positive forecasts of future electricity production after experiencing longer sunshine duration in the past week. We examine a battery of alternative explanations and rule out mechanisms based on liquidity constraints and wealth effects.