Gabriele Lepori has a new paper.

Psychological research documents that individuals are more likely to resort to superstitious practices when operating in environments dominated by uncertainty, high stakes, and perceived lack of control over the outcomes. Based on these findings, we suggest that the stock market represents an ideal breeding ground for superstition and then test whether superstition-induced behavior affects investment decisions. Our empirical analysis focuses on some beliefs associated with eclipses, phenomena that are typically interpreted as bad omens by the superstitious both in Asian and Western societies, and we employ a dataset containing 362 such events over the period 1928-2008. Using four broad indices of the U.S. stock market, we uncover strong evidence in support of our superstition hypothesis in four distinct ways. First, the occurrence of negative superstitious events (i.e. eclipses) is associated with below-average stock returns, which is consistent with a diminished buying pressure coming from the superstitious. Second, the size of the superstition effect is estimated to increase in times of high market uncertainty and when eclipses draw wide media coverage and public attention. Third, the negative performance of the market during the superstitious event is followed by a reversal effect of similar magnitude (10 basis points per day) on the subsequent trading days. Fourth, eclipses are accompanied by a trading volume decline. When we extend our analysis to a sample of Asian countries, we find analogous results. The patterns we document are inconsistent with the Efficient Market Theory, as eclipses are perfectly predictable events.

In other words, eclipses are bad days for buying stocks.  Maybe others don't want to make a commitment during the time of a possibly bad omen or maybe they're outside watching.  Trading volume is low.  After the day of the eclipse, there is a one to three day window, during which the lower returns are reversed.  So ideally there are buying opportunities right after the eclipse with (minor) extra-normal profits available.  The final section of the paper looks at Asian stock market returns on days of eclipse and finds comparable results; I wonder if this would extend to potentially unlucky days?

So how were Indian returns today?  (Check here).

Here is a John Nye and Noel Johnson piece on how Asian children do (better!) if they are born in the Year of the Dragon.

Sebastian Mallaby sends me a link to this paper, with this summary statement:

This paper analyzes the market for credit default swaps and makes specific recommendations about appropriate roles for clearinghouses and about how they should be organized. Clearinghouses are not a panacea and the benefits they offer will be reduced if there are too many of them. Further, clearinghouses that manage only credit default swaps but not other kinds of derivative contract may actually increase counterparty and systemic risk, contrary to the assumption of many policy makers.

ReincarnationBank.com.

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For the pointer I thank Deane J.  I am also pointed to this site: you can advertise on the moon.

David Warsh reports that Romer has resigned from Stanford and he has a plan to change the world:

…[he has] a scheme to persuade nations around the world to adopt “special administrative zones,” managed in many cases by foreign governments, based on the model of Hong Kong, which, for 150 years, was administered from afar by Britain. “Hong Kong was the most successful economic development in history,” says Romer. The rules developed there over time were codified, copied and installed by the Chinese government in four special zones along the coast in the 1980s; the experiment worked so well that the system was adopted country wide.

Romer presented a rehearsal version of his ideas at a seminar in May at San Francisco’s Long Now Foundation. You can watch Romer’s A Theory of History, With an Application online (or just this five-minute snippet), or read Long Now co-founder Stewart Brand’s summary of the talk. It costs $995 to watch in real-time, along with all the rest of the proceedings, the 18-minute version that Romer plans to deliver this week in England.  But presumably the talk will be available online soon enough; the TED forum bills itself as offering “riveting talks by remarkable people, free to the world.” And, according to Brand, Romer plans to open an Institute with a website this summer.

I'm all for this idea (how would the Swiss do in Nigeria?), but I fear that Hong Kong is a cautionary tale in the other direction.  Due mostly to the pressures of nationalism, the world's most successful development experiment was ended without a second thought.  And its initiation was backed by brute colonial force.  Which country is most likely to allow another country to manage part of its territory in a new experiment?