![]() ![]() It takes most people a moment to see that the bill on top is real and that the bill below it is fabricated. Few investors admit to choosing a stock based on its name biases like these are powerful precisely because they operate below the surface of conscious awareness. ![]() The same logic explains why we tend to prefer people with simpler names, and why the aphorism “caution and measure win you treasure” seems truer than “caution and measure win you riches.” In each case, the more fluent concept seems more familiar, less risky, less threatening, and more trustworthy-and the same is true of stocks and, more broadly, of economic decisions. Why do investors, many of whom painstakingly dissect reams of data to understand companies’ finances, also base their decisions in part on a stock’s ticker symbol? The answer is that reading pronounceable ticker symbols is slightly less mentally taxing people generally prefer objects and events that are more “ cognitively fluent,” or easier to process. Other researchers have since found similar results. (We also made sure that our results weren’t driven by extraneous factors, like differences between the foreignness, size, or industry type of companies with pronounceable and unpronounceable ticker symbols.) While these effects are surprising, we also found that companies with simpler names (like NOVA Corporation) outperformed those with complex names (Magyar Telekom Távközlési Részvénytársaság). A trader who invested a thousand dollars across the companies with pronounceable ticker codes would have emerged eighty-five dollars wealthier after one day of trading than a trader who put the same thousand dollars in companies with unpronounceable codes. The effect was strongest during the first few days of trading over time, it weakened, but never quite vanished. ![]() boost than their unpronounceable counterparts. Across both markets, stocks with pronounceable symbols enjoyed a bigger post-I.P.O. We separated stocks with pronounceable ticker symbols from those with unpronounceable symbols. Several years ago, Daniel Oppenheimer and I examined the performance of nearly a thousand stocks that entered the New York Stock Exchange and American Exchange between 19. (The trend holds if you include all twenty-three stocks that began trading between early October and early November: after twenty-four hours on the market, seventy-five per cent of the companies with pronounceable symbols appreciated, but only forty-seven per cent of those with unpronounceable tickers appreciated.) Eight stocks is a tiny sample by any standard, and stock prices are shaped by far more powerful forces-but the relationship between ticker pronounceability and early performance seems to hold with larger samples, too. The pronounceable OCIP, MEP, LEAF, and WUBA (OCI, Midcoast, Springleaf, and 58.com, respectively) appreciated by between one percent and fifteen per cent, whereas the unpronounceable ESNT, BRX, MVNR, and TWTR (Essent, Brixmor, Mavenir, and Twitter) depreciated by between half a per cent and fourteen per cent. Short-term investing is certainly a gamble, but if you look back at the eight companies, you’ll find one subtle feature that distinguishes the climbers from the fallers: whether their ticker symbols are pronounceable according to the rules of English-that is, whether it’s possible to read them out loud as if they were words, without adding extra sounds. Malkiel’s book has sold more than a million copies. In his classic 1973 guide to investing, “ A Random Walk Down Wall Street,” the Princeton economist Burton Malkiel famously claimed that “a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts.” Investors, Malkiel argued, were at the mercy of the markets, and though prices generally rise in the long run, it’s impossible to beat the market reliably and consistently. Many experts argue that it’s impossible to reliably forecast stock prices in the short run. At first it’s hard to discern a difference between the early appreciators and the early depreciators. They’re a diverse group of tech, energy, property, and finance companies, valued at their respective I.P.O.s between three hundred and sixty million dollars (Mavenir Systems) and $24.5 billion dollars (Twitter).īy the end of their first day of trading, Midcoast, Springleaf, 58.com, and OCI had risen in value, whereas Essent, Brixmor, Mavenir, and Twitter had fallen. Between the beginning of October and early November, the following eight companies were among more than twenty that began trading on the New York Stock Exchange: OCI Partners, Springleaf Holdings, Brixmor Property Group, Essent Group, 58.com, Mavenir Systems, Midcoast Energy Partners, and Twitter. ![]()
0 Comments
Leave a Reply. |
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |