Abstract. Previous research shows that stocks with fluent names trade at higher prices. In this paper, we test whether fluency simply appeals to naive investors, or actually identifies better firms. We find that companies with fluent names are more profitable, but some investors appear to neglect this information. Correspondingly, stocks with fluent names yield higher abnormal returns relative to stocks with nonfluent names. Consistent with our theoretical model, these effects are concentrated among firms with low market capitalization and high sensitivity to investor sentiment. The results lend novel support to the view that company names convey information.
Coauthors. Martijn van den Assem (VU Amsterdam, Tinbergen Institute) and Remco Zwinkels (VU Amsterdam, Tinbergen Institute).
Manuscript. You can download the paper here, and the fluency data here.
Presentations. The Israel Behavioral Finance Conference at Tel Aviv University, the Research in Behavioral Finance Conference at VU Amsterdam, Leibniz Universität Hannover, the Erasmus Finance Day at Erasmus University Rotterdam, the Finance Forum at CUNEF, and the Behavioral Finance Working Group Conference at Queen Mary University of London.
Publication. Journal of Behavioral and Experimental Finance, Volume 39, September 2023, 100819, DOI: https://doi.org/10.1016/j.jbef.2023.100819.