Nature Magazine: Easily Pronounced Stocks Perform Better

On Wednesday, the science journal Nature ran an article demonstrating that easily pronounced stocks perform better than their counterparts, whose names are more difficult to pronounce. This quote sums up the research nicely:

For those of you struggling to pick a winner in the complex world of stocks and shares, help is at hand. A psychology study has found that, at least in the short-term, stocks with names that are easier to pronounce consistently outperform those with more confusing monikers.

According to Adam Alter and Daniel Oppenheimer, psychologists at Princeton University, New Jersey, it's all about fluency. When people try to understand complicated information, they tend to focus on the simplest parts. This means that people naturally favour things that are more fluent, and easier to think about...

Oppenheimer says that considering psychological factors such as name choices could help to improve economic models. Because shares are traded by human beings, he reasons, behavioural foibles will undoubtedly influence how the market works.

Regular readers will know that we at Blackfriars deeply believe in "less is more" as a mantra of marketing strategy, based upon numerous psychological and cognitive studies. But it is reassuring to know that these same concepts work as well in stock markets as they do in the marketplace.