Alphabetic Bias, Investor Recognition, and Trading Behavior

Review of Finance, 2016, 20, 693-723

49 Pages Posted: 4 Feb 2014 Last revised: 20 Jun 2016

Heiko Jacobs

University of Mannheim, Finance Department

Alexander Hillert

Goethe University Frankfurt - Department of Finance

Date Written: November 8, 2015

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 paper is the first to explore the implications of this alphabetic bias in financial markets. We find that U.S. stocks that appear near the top of an alphabetical listing have about 5% to 15% higher trading activity and liquidity than stocks that appear towards 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.

Keywords: trading behavior, behavioral finance, name effects, limited attention, ordering effects

JEL Classification: G02, G12, G14

Suggested Citation

Jacobs, Heiko and Hillert, Alexander, Alphabetic Bias, Investor Recognition, and Trading Behavior (November 8, 2015). Review of Finance, 2016, 20, 693-723. Available at SSRN: https://ssrn.com/abstract=2390015 or http://dx.doi.org/10.2139/ssrn.2390015

Heiko Jacobs (Contact Author)

University of Mannheim, Finance Department ( email )

Mannheim, 68131
Germany
+49-(0)621-181-3453 (Phone)
+49-(0)621-181-1534 (Fax)

HOME PAGE: http://weber.bwl.uni-mannheim.de/mitarbeiter/heiko_jacobs/

Alexander Hillert

Goethe University Frankfurt - Department of Finance ( email )

House of Finance
Grueneburgplatz 1
Frankfurt am Main, Hessen 60323
Germany

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