ABCs of Trading: Behavioral Biases Affect Stock Turnover and Value

Review of Finance, Forthcoming

47 Pages Posted: 17 Jan 2014 Last revised: 17 Jul 2015

See all articles by Jennifer Itzkowitz

Jennifer Itzkowitz

Seton Hall University - Department of Finance & Legal Studies

Jesse Itzkowitz

Ipsos Behavioral Science Center

Scott Rothbort

Seton Hall University - Department of Finance & Legal Studies

Date Written: March 30, 2015

Abstract

Psychological research suggests that individuals are satisficiers. That is, when confronted with a large number of options, individuals often choose the first acceptable option, rather than the best possible option (Simon 1957). Given the vast quantity of information available and the widespread convention of listing stocks in alphabetical order, we conjecture that investors are more likely to buy and sell stocks with early alphabet names. Consistent with this view, we find that early alphabet stocks are traded more frequently than later alphabet stocks and that alphabeticity also affects firm value. We also document how these effects have changed over time.

Keywords: Alphabetical Order, Heuristics, Stock Turnover, Behavioral Finance, Company Name

JEL Classification: G11, G12

Suggested Citation

Itzkowitz, Jennifer and Itzkowitz, Jesse and Rothbort, Scott, ABCs of Trading: Behavioral Biases Affect Stock Turnover and Value (March 30, 2015). Review of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2379532 or http://dx.doi.org/10.2139/ssrn.2379532

Jennifer Itzkowitz (Contact Author)

Seton Hall University - Department of Finance & Legal Studies ( email )

400 South Orange Avenue
South Orange, NJ 07079
United States

Jesse Itzkowitz

Ipsos Behavioral Science Center ( email )

360 Park Avenue South
Floor 17
New York, NY 10010
United States

Scott Rothbort

Seton Hall University - Department of Finance & Legal Studies ( email )

400 South Orange Avenue
South Orange, NJ 07079
United States

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