The power of primacy: Alphabetic bias, investor recognition, and market outcomes

Extensive research has revealed that the convention of alphabetical name ordering tends to provide an advantage to those positioned in the beginning of the alphabet. This paper is the first to explore implications of this alphabetic bias in the natural setting of financial markets. Most notably, we find that stocks with names early in alphabet have about 5% to 15% higher trading activity and liquidity. These findings are related to firm visibility as well as investor sophistication. International evidence, mutual fund flows and other settings further support the idea that ordering effects are strong enough to affect economic aggregates.