Do Investors LUV Your Stock…Symbol?
Many consider a stock symbol to be a sort of formality but did you know that “likability” and even the pronounceability of a ticker symbol can have a positive impact on valuation and liquidity?
A study published in the Journal of Financial Markets finds that the “likability” and even the pronounceability of a ticker symbol are positively related to a stock’s value.
The study found that valuations of companies with symbols the participants liked, including ACE, BRO and LUV, were about 1.3 percentage points higher than valuations of those with handles rated less favorably.
The study says, is that a likable symbol is associated with greater liquidity, since investors also tend to trade stocks with more-likable symbols at a higher rate. Alternatively, the study suggests, a higher value could be the result of mispricing; investors might unconsciously assign a higher value to a symbol that is easier to pronounce.
Download the full study HERE.