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Company name fluency and stock returns

Author

Listed:
  • Montone, Maurizio
  • van den Assem, Martijn J.
  • Zwinkels, Remco C.J.

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.

Suggested Citation

  • Montone, Maurizio & van den Assem, Martijn J. & Zwinkels, Remco C.J., 2023. "Company name fluency and stock returns," Journal of Behavioral and Experimental Finance, Elsevier, vol. 39(C).
    • Handle: RePEc:eee:beexfi:v:39:y:2023:i:c:s2214635023000333
    DOI: 10.1016/j.jbef.2023.100819
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    More about this item

    Keywords

    Fluency; Investor recognition; Company names; Stock returns;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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