Three studies investigated the impact of the psychological principle of fluency (that people tend to prefer easily processed information) on short-term share price movements. In both a laboratory study and two analyses of naturalistic real-world stock market data, fluently named stocks robustly outperformed stocks with disfluent names in the short term. For example, in one study, an initial investment of $1,000 yielded a profit of $112 more after 1 day of trading for a basket of fluently named shares than for a basket of disfluently named shares. These results imply that simple, cognitive approaches to modeling human behavior sometimes outperform more typical, complex alternatives.heuristic reasoning ͉ psychology ͉ stock market S hort-term f luctuations in stock prices are notoriously difficult to predict (1, 2). For decades, economists have created complicated mathematical models that ultimately fail to describe short-term share price movements (3). Indeed, the range of factors that inf luence share prices is so broad that many eminent scholars describe short-term price changes as ''random'' (3-5). Some economists have even suggested that a monkey throwing darts at a dartboard of stocks is as likely as a seasoned financial analyst to select immediately profitable stocks (3).If stock market analysis were solely the province of economists and financial analysts, one might accept their robust failure to predict short-term stock prices as an indication that stock prices are only predictable in the long term. However, as the advent of behavioral economics demonstrated in the 1970s (6, 7), psychological theory has the potential to inform economic thought. Researchers have recently begun to consider the inf luence of incidental variables on stock market investment. Consistent with the finding that people are more optimistic when in a good mood (8), markets are more likely to appreciate on sunny rather than rainy days (9, 10). Similarly, behavioral finance researchers have found a so-called ''home bias,'' in which people prefer to invest in local as opposed to international markets (11). Although investors stand to benefit from diversifying their portfolios, they might prefer the familiarity of domestic stocks, avoiding the lack of information associated with foreign markets. Inspired by the success of these psychological approaches to economic analysis, we sought to develop a straightforward alternative to complex economic models in the quest to predict short-term stock price movements.When people attempt to understand complicated information, they tend to simplify the task by relying on mental shortcuts, or heuristics (12). For example, people tend to judge stimuli that are f luent, or easy to process, more positively on a range of evaluative dimensions. Studies have shown that people believe f luent stimuli are more frequent (13), true (14), famous (15), likeable (16), familiar (17), and intelligent (18) than similar but less-f luent stimuli. Perhaps most relevant to investment behavior, f luency gives rise to feeli...