Company Name Fluency and Stock Returns

The Impact of Stock Names on the Expected Stock Return

“…The two theories reach completely opposite conclusions. There is already a paper [4] (van den Assem et al, 2018) that uses the data from the US stock market to check both theories and conclude that the "information" theory matches the reality. In our paper, however, we want to examine the two theories with the Chinese stock market data, as it is a representative of the emerging market and varies from the US market in many important aspects.…”

“…In our paper, however, we want to examine the two theories with the Chinese stock market data, as it is a representative of the emerging market and varies from the US market in many important aspects. Now we briefly go through the mathematical model mentioned in Assem's paper [4] (van den Assem et al, 2018). Consider an economic process that a company is operating one and only one risky project with a one-time income f at the end of the project.…”

“…In Assem's paper [4] (van den Assem et al, 2018) he concludes that the information theory wins by checking out the US stock market data. So to verify if the assumption of the information theory is indeed correct, we have the third hypothesis.…”

“…When considering the stock names, it is very interesting to think about whether or not rational investors should take it as a meaningful input when making decisions. In the paper of van den Assem [4] (2018), the impact of stock names on the expected stock returns is discussed in detail. Two models-the "liking" theory and the "information" theory-competing with each other are examined according to the US stock market data, and the conclusion supports the so-called "information" theory, which indicates that stock names contain useful information and the use of stock names comes from rational and sophisticated investors rather than irrational and noise traders.…”

“…In our paper, we apply the method of van den Assem [4] (2018) to the reality of the Chinese stock market, and analyze how the stock names affect the expected stock returns. The results show that the Chinese stock market data support the liking theory, which indicates that the stock names play a purely psychological role in the decision process of investors, and that the noise traders dominates in the Chinese stock market.…”