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Alphabetic Bias, Investor Recognition, and Trading Behavior

Author

Listed:
  • Heiko Jacobs
  • Alexander Hillert

Abstract

Extensive research has revealed that alphabetical name ordering tends to provide an advantage to those positioned in the beginning of an alphabetical listing. This article is the first to explore the implications of this alphabetic bias in financial markets. We find that US stocks that appear near the top of an alphabetical listing have about 5–15% higher trading activity and liquidity than stocks that appear toward the bottom. The magnitude of these results is negatively related to firm visibility and investor sophistication. International evidence and fund flows further indicate that ordering effects can affect trading activity and liquidity.

Suggested Citation

  • Heiko Jacobs & Alexander Hillert, 2016. "Alphabetic Bias, Investor Recognition, and Trading Behavior," Review of Finance, European Finance Association, vol. 20(2), pages 693-723.
    • Handle: RePEc:oup:revfin:v:20:y:2016:i:2:p:693-723.
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    File URL: http://hdl.handle.net/10.1093/rof/rfv060
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    References listed on IDEAS

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    1. Chen, Jia & Hou, Kewei & Stulz, Rene M., 2015. "Are Firms in 'Boring' Industries Worth Less?," Working Paper Series 2015-02, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    2. Harrison Hong & Jeremy C. Stein, 2007. "Disagreement and the Stock Market," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 109-128, Spring.
    3. Mark Grinblatt & Matti Keloharju, 2001. "How Distance, Language, and Culture Influence Stockholdings and Trades," Journal of Finance, American Finance Association, vol. 56(3), pages 1053-1073, June.
    4. Daniel Feenberg & Ina Ganguli & Patrick Gaulé & Jonathan Gruber, 2017. "It’s Good to Be First: Order Bias in Reading and Citing NBER Working Papers," The Review of Economics and Statistics, MIT Press, vol. 99(1), pages 32-39, March.
    5. Choi, Darwin & Getmansky, Mila & Tookes, Heather, 2009. "Convertible bond arbitrage, liquidity externalities, and stock prices," Journal of Financial Economics, Elsevier, vol. 91(2), pages 227-251, February.
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