Company Name Fluency and Stock Returns
40 Pages Posted: 22 Feb 2018 Last revised: 23 Feb 2019
Date Written: February 1, 2019
Recent research shows that stocks with fluent names trade at higher prices. It is not clear, however, whether fluency simply appeals to naive investors, or conveys information on the quality of the firm. In this paper, we tease out these two stories. We show that companies with fluent names exhibit higher profitability, but this information is not fully captured by investors and analysts. Stocks with fluent names then yield higher abnormal returns than stocks with nonfluent names, especially when beginning-of-period sentiment is high. Overall, we provide a new kind of confirmation of the tendency of investors to undervalue intangibles.
Keywords: Fluency; Investor Recognition; Asymmetric Information; Stock Returns
JEL Classification: G12, G14, G41
Suggested Citation: Suggested Citation