What if Facebook Picked a Different Ticker?
Studies show that pronounceable and "clever" stock tickers do better historically.
One of this year's biggest Wall Street stories has been the breathtaking decline of Facebook (FB) following its May initial public offering. Simply put, the social media darling went public at $38 and is now trading around $19.25 -- a 49.3% plunge.
There is no denying that investors have a myriad of concerns about Facebook
Maybe Facebook could have gotten off to a better start and kept the sellers at bay for a little while by doing something simple, such as picking a different ticker other than "FB." It might sound wacky, but there is evidence to support the notion that stocks with pronounceable tickers do perform well.
According to the Wall Street Journal, Princeton's Adam Alter and Daniel Oppenheimer looked at nearly 800 symbols that debuted on the New York Stock Exchange and the American Stock Exchange between 1990 and 2004 and divided them according to whether their symbol was pronounceable. They found investing $1,000 in the pronounceable stocks at the start of their first day of trading would have made you $85.35 more in that day than investing in unpronounceable ones.
Another study by Pomona College finance professor Gary Smith was cited in the Journal article. Smith's study focused on the longer term performances of stocks with clever tickers. The result: From 1984 to 2004, a portfolio of stocks people considered the cleverest returned 23.6% compounded annually, compared with 12.3% for a hypothetical index of all NYSE and Nasdaq stocks, the Journal reported.
Clearly, investing solely on the basis of ticker alone is a lot like going to the track and betting on a horse just because one likes the colors of the horse's silks. Said differently, no one in his or her right mind should be buying a stock based on ticker alone.
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