Company Name Fluency and Stock Returns
37 Pages Posted: 22 Feb 2018 Last revised: 16 Nov 2018
Date Written: November 1, 2018
Recent research shows that stocks with fluent names trade at higher prices, but it is not clear whether fluency conveys information or simply appeals to naïve investors. In this paper, we tease out these two hypotheses. We find that fluent stocks yield higher abnormal returns than nonfluent ones, especially when naïve investor participation is high. These results lend support to the information story, according to which fluency is only partly reflected in prices due to naïve investors' inattention to the informative signal. Our findings provide a new kind of confirmation of the tendency of investors to undervalue intangibles.
Keywords: Fluency; Investor Recognition; Asymmetric Information; Stock Returns
JEL Classification: G10, G12, G14, G32
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