For the past quarter of a century, the Hang Seng Index, a weighted index of selected companies on Hong Kong’s stock exchange, has been gripped by a peculiar phenomenon. This strange occurrence is often referred to as the ‘Adam Cheng Effect’ and revolves around, you guessed it, Adam Cheng.
Some background information about Cheng: a Hong Kong native born in the late 1940s, he began his professional career as a singer/actor in his 30s and gained notoriety in Hong Kong for starring in lead roles in TV shows such as Cold Blood Warm Heart and The Greed of Man, for both of which he performed the theme song.
Cheng’s acting though will be the focus for this article, particularly his work in the aforementioned TV series The Greed of Man which is in fact where the mysterious recurrence involving the Hang Seng began.
In the series Cheng played the role of a stock broker, Ting Hai, who accumulated a fortune through shadily short selling derivatives during what is known as a bear market (a general decline in the stock market over a sustained period where high investor optimism is increasingly replaced with fear and pessimism). Through this deceitful process the Ting family became exceptionally rich whilst often bankrupting those who invested with them. Eventually, they were defeated in a sort of stock market duel if you will, where the protagonist of the series Fong-Chin-bok’s investment company emerged victorious in a last man standing battle, leaving the Ting’s in billions of dollars of debt.
The series concluded with Ting Hai, having been backed by criminal syndicates and wanting to avoid physical retribution as well as jail time, forcing his four sons (shown after their defeat in the featured image) to commit suicide by jumping off the stock exchange building (they had also become embroiled in the deceitful stock market activities). Ting Hai himself then attempted the same, but survived the fall and was forced to see out a life sentence in prison for his misdemeanours.
How does this fictional story link to the Hang Seng though? Well, empirical evidence since The Greed of Man aired has led many to believe that this fictitious scenario has influenced the way people view and act regarding the stock market.
In October of 1992 after The Greed of Man aired for the first time on TVB the Hang Seng fell by 600 points. In isolation, this means nothing and doesn’t even suggest a link between Adam Cheng’s deceptive role and stock market behaviour, however when you look at what has happened since with the airing of other shows starred in by Cheng, things get a little eerie…
After Cheng’s next venture Instinct made it’s debut on TVB in 1994 the Hnag Seng fell by over 2000 points. In 1997 when Cold Blood Warm Heart aired the Hang Seng dropped by around 735 points. And the list goes on:
- Lord of Imprisonment, 1999: 6.5% fall
- The Conqueror’s Story, 2004: 198 point fall on the first day the drama was aired
- Return Home, 2007: 1165 point fall
- Master of Play, 2012: 10% fall
- Saving General Yang, 2013: 610 point fall on the day following the premiere
Finally, The Greed of Man was rerun on TVB in 2015 and the Hang Seng fell by roughly 560 points on the first day of the rerun. And these are just a few of the more prevalent examples.
Adam Cheng is the common denominator with all these, seemingly otherwise unexplained, drops in the stock market. Something about Cheng’s appearance on TV or in cinemas appears to be reminding people of his original big role in The Greed of Man, then affecting how individuals act in the stock market, presumably with a lot more distrust of it given the deceptive role Cheng played in the show.
There are of course those who doubt the theory, and there a some, albeit decidedly few, exceptions to the rule. After Cheng’s appearance in Bar Bender, Chor Lau-heng, and The Driving Power the Hange Seng Index did in fact rise, although not as much as some of the falls experienced after Cheng’s other appearances.
And of course, there would be immense difficulty to prove what has become popularised as the ‘Adam Cheng Effect’ given the vast array of variables which determine the level at which the stock markets operate, many chalk it down to coincidence and some just think of it as a quirky effect of no real significance. And yes admittedly these aren’t huge falls by comparison with other drops experienced on stock exchanges, but by no means does this mean they aren’t significant.
I think though it may speak to how we as people act in the stock market, and in the economy more generally. A few weeks ago I wrote an article focused on behavioural economics and some of the implications that has for how we act as economic agents. This is a field that is growing rapidly in popularity now, notably after Richard Thaler won the 2017 Nobel Prize for Economic Sciences in acknowledgement for his behavioural work.
No doubt, the ‘Adam Cheng Effect’ is a matter for the behavioural side of economics, and if bought into adds even more weight for the increasing use of behavioural studies to be incorporated into the study of economics more generally. The logic behind the effect though seems pretty clear: when The Greed of Man aired and became popular it detailed a story about how stockbrokers may act to make a fortune and swindle investors out of their money; Cheng became synonymous with the main antagonist Ting Hai, almost like how Daniel Radcliffe will always be seen as Harry Potter regardless of the character he may be portraying; whenever Cheng reappears on TV or in the cinema etc. those watching remember the underhand character he played in The Greed of Man, and the story more generally, and temporarily become more reluctant to invest in the stock market perhaps even selling off some of their stocks in the process.
I mean it’s clearly not a rational idea, the story is completely fictional, and doesn’t reflect anything that might actually affect whether stocks are going to rise or fall. Yet, the evidence seems remarkably stacked in favour of the ‘Adam Cheng Effect’. This is, I think, yet another example of how behavioural insights can explain some of the stranger decisions we see in economics.
Whether Adam Cheng is actually responsible for these stock market falls, we may never know. Cheng himself is aware of the effect but states that he thinks nothing of it nor that his character Ting Hai is linked to drops in the Hang Seng. However, if you notice Adam Cheng starring in a new role, or a rerun of one of his shows is about to rerun on TVB, it might be time to anticipate a drop in the Hang Seng.
JC Economics 