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
Date Written: November 8, 2015
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: Suggested Citation