Home > Finance and Investments > Stocks With Easily Pronounced Names Perform Best in the Short Term

Stocks With Easily Pronounced Names Perform Best in the Short Term

Three studies investigated the impact of the psychological principle of fluency that people tend to prefer easily processed information on short-term share price movements.  In both a laboratory study and two analyses of naturalistic real-world stock market data, fluently named stocks robustly outperformed stocks with disfluent names in the short term.

For example, in one study, an initial investment of $1,000 yielded a profit of $112 more after 1 day of trading for a basket of fluently named shares than for a basket of disfluently named shares. These results imply that simple, cognitive approaches to modeling human behavior sometimes outperform more typical, complex alternatives.

Read more at How should you pick stocks if you know nothing about the market? – Barking up the wrong tree.

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