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Stocks with Simple Names Outperforms Stocks with Awkward Names in the Short Term
Research (by Adam Alter and Daniel Oppenheimer, psychologists at Princeton University, New Jersey) suggests that companies with simple to pronounce names do better than companies with complex names. The study compared IPO’s for companies with simple names versus companies with strange and awkward names. The result suggests that stocks for companies with simple names did better in the short term after the IPO, but the effect diminished in the long term.

An investment of $1000 was after just one day in the fluent portfolio (of 10 different stock) $118 ahead of the tongue-twisters; and after a year, it was US$333 ahead.

The reason: When people try to understand complicated information, they tend to focus on the simplest parts. This means that people naturally favour things that are more fluent, and easier to think about.

Quote: “Name fluency is only one factor of many that influence stock prices,” he said. “Our results suggest that stock price models will benefit from taking into account psychological factors like name fluency � not that name fluency is the only or most important determinant of stock prices.”