Who knew? I've been spending the better part of a decade focused on cash flow statements, balance sheets, income statements, industry due diligence, sales checks, market internals and the occasional technical indicators and all I really needed to do in order to be the next mega-investor was K.I.S.S. (Keep It Simple Stupid).
The latest entry into the "I Can't Believe Someone Funded That Study Department"...two psychologists from Princeton University have determined that fluency of a company's name was highly correlated with a stock's performance.
To check, Alter and Oppenheimer did a second study looking at 89 real stocks that were traded on the New York exchange between 1990 and 2004. They asked 16 undergraduates to grade the fluency of the stock names on a sliding scale. Then they checked on the stocks' performance.
As anticipated, the more complex a share's name, the poorer it performed on the first day of trading. The effect appeared to wane as time went on; after 6 months, when more information about the stock was presumably available, the name alone couldn't be used to predict a single stock's performance.
Hmmm, so why we're all wondering what James Simons and T. Boone Pickens have that we don't; I wouldn't have expected it to be a preference for monosyllabic company names. :)
I'm clearly destined to be the next Soros: I already speak with the same accent he does:-)
As for the study, what a joke....but let's try to take it seriously for a minute:
- 89 stocks, 16 students are such a small number, they don't have a statistically relevant sample
- we all now there are many other far more material factors influencing stock performance, and what a surprise, the don't mention anything on how they attemted to eliminate these other factors from the "study".
Posted by: Zoli Erdos | May 30, 2006 at 11:37 PM