Alphabetic Bias, Investor Recognition, and Trading Behavior

Heiko Jacobs and Alexander Hillert

Review of Finance, 2016, vol. 20, issue 2, 693-723

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 article is the first to explore the implications of this alphabetic bias in financial markets. We find that US stocks that appear near the top of an alphabetical listing have about 5–15% higher trading activity and liquidity than stocks that appear toward 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.

Date: 2016
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