Ticker fluency, sentiment, and asset valuation

摘要

The objective of this study is to examine whether investors channel their propensity to speculate differently depending on the fluency of a stock's ticker (i.e., the ticker's ease of pronunciation). Baker and Wurgler (2006) suggest that this propensity to speculate defines investor sentiment, and Green and Jame (2013) contend that fluency of a company's name can affect the level of investor recognition for the stock. We hypothesize that when investors speculate, they speculate in stocks that have greater recognition and thus cause such stocks to be overvalued. We test this hypothesis by examining whether, when beginning-of-period sentiment is high, stocks with most-fluent tickers underperform stocks with least-fluent tickers (as measured by returns). We find that in periods preceded by high sentiment, stocks with most-fluent tickers have lower returns than stocks with least-fluent tickers have. This study contributes to the literature by documenting that stock prices are affected by characteristics of securities with no bearing on stocks' underlying cash flows, risk characteristics, or required returns. Additionally, a readily usable measure of the affinity that an investor might have for a particular ticker is presented and developed.