How Much Do Investors Trade Because of Name/Ticker Confusion?
64 Pages Posted: 12 Jun 2019
Date Written: May 25, 2019
We conduct a search for pairs of companies with similar names/ticker symbols. Between 12% and 25% of such pairs exhibit co-movements in trading turnover, which we attribute to investor confusion. We estimate that trades made by mistake contributed to 5% of the trading turnover. The three-hour CARs for the company chosen by mistake around the time intervals with extreme returns for the paired company are 0.5%. The confusion is highest for large companies and around time intervals with high turnover. We show that when the cause of confusion disappears, the co-movement in turnover also disappears.
Keywords: Ticker Symbol, Investor Confusion, Similarly Identified Securities, Market Inefficiency, Investor Irrationality
JEL Classification: G10, G14
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