What's the difference between investing and betting?

Submitted by Prometheus 6 on May 30, 2006 - 6:07am.
on |

Hey, good question, P6!

"This might be because factors other than name fluency have a more pronounced effect on stock price as time passes," said Adam Alter, a graduate student at Princeton who was the lead author of the study.

One would hope so. 

What's in the Name? Researchers Suggest It's Money
By NICHOLAS BAKALAR

A stock ticker symbol or company name that is easy to pronounce may be a significant factor in short-term increases in stock price, according to a report published online yesterday in The Proceedings of the National Academy of Sciences.

Two researchers created a list of fictional stocks and then had a group of students rate them according to ease of pronunciation. "Ulymnius," for example, was rated complex, while "Mayville" was not.

They then asked a second group to estimate the future performance of each of the stocks. As the researchers predicted, "fluently named" companies were estimated to outperform the hard-to-pronounce ones by a significant margin.

The researchers then tested name complexity and the performance of real initial public offerings listed on the New York and American Stock Exchanges. A $1,000 investment in a group of stocks with easy names yielded $112 more in profit than the same investment in a group with difficult names. But the effect began to disappear over time.

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