Company Name Fluency and Stock Returns
30 Pages Posted: 22 Feb 2018 Last revised: 21 Sep 2021
Date Written: September 21, 2021
Previous research shows that stocks with fluent names trade at higher prices. In this paper, we test whether fluency simply appeals to naive investors, or actually identifies better firms. We find that companies with fluent names are more profitable, but unsophisticated investors appear to neglect this information. Correspondingly, stocks with fluent names yield higher abnormal returns relative to stocks with nonfluent names. Consistent with our theoretical model, these effects are concentrated among firms with low market capitalization and high sensitivity to investor sentiment. The results lend novel support to the view that company names convey information.
Keywords: Fluency; Investor Recognition; Asymmetric Information; Stock Returns
JEL Classification: G12, G14, G41
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