Type of Publication: Article in Journal

Alphabetic Bias, Investor Recognition, and Trading Behavior

Author(s):

Jacobs, Heiko; Hillert, Alexander

Title of Journal:

Review of Finance

Volume (Publication Date):

2016 (2016)

Number of Issue:

20

pages:

693-723

Keywords:

trading behavior, behavioral finance, name effects, limited attention, ordering effects

Digital Object Identifier (DOI):

doi:10.1093/rof/rfv060

Link to complete version:

https://academic.oup.com/rof/article/20/2/693/2461444

Citation:

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Abstract

Abstract

Extensive research has revealed that alphabetical name ordering tends to provide an advantage to those positioned in the beginning of an alphabetical listing. This paper is the first to explore the implications of this alphabetic bias in financial markets. We find that U.S. stocks that appear near the top of an alphabetical listing have about 5% to 15% higher trading activity and liquidity than stocks that appear towards the bottom. The magnitude of these results is negatively related to firm visibility and investor sophistication. International evidence and fund flows further indicate that ordering effects can affect trading activity and liquidity.