The Alphabet and Idiosyncratic Volatility

43 Pages Posted: 11 Dec 2022

See all articles by Magnus Blomkvist

Magnus Blomkvist

EDHEC Business School

Okke Bergers

EDHEC Business School

Date Written: November 25, 2022


We find that stocks with names earlier in the alphabetical ordering exhibit greater idiosyncratic volatility. Stocks in the first 5% of the cross-sectional alphabetical ordering have 4.5% higher idiosyncratic volatility relative to others. When focusing on firms that change names, we report that their idiosyncratic volatility is 7% higher during the period they belong to the first 5%. In accordance with a noise trading explanation, the effect is strongest during periods of high investor sentiment and among stocks with high turnover. We attribute the findings to increased noise trader activity in early alphabetical stocks stemming from heuristic-based investing, making arbitrage less efficient and thus increasing volatility.

Keywords: Volatility, Alphabet Bias, Noise Investors, Idiosyncratic Volatility

JEL Classification: G12, G41, G53

Suggested Citation

Blomkvist, Magnus and Bergers, Okke, The Alphabet and Idiosyncratic Volatility (November 25, 2022). Available at SSRN: or

Magnus Blomkvist (Contact Author)

EDHEC Business School ( email )

58 rue du Port
Lille, 59046

Okke Bergers

EDHEC Business School

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