Predicting short-term stock fluctuations by using processing fluency
Alter and Oppenheimer test whether processing fluency, the principle that people tend to prefer information that is easy to process, shows up in share prices. Three studies are reported, one in the laboratory and two analyses of naturalistic real-world stock market data. In all three, stocks with fluently pronounceable names robustly outperformed stocks with disfluent names over the short term. In one of the market analyses, an initial investment spread across a basket of fluently named shares returned a larger profit after a single day of trading than the same sum placed in a basket of disfluently named shares. The authors present this as evidence that a very simple cognitive variable, how easily a name is processed, can track short-term price movement, and they draw the broader conclusion that simple, cognitive approaches to modelling human behaviour sometimes outperform the typical, more complex alternatives. The abstract reports short-term movements only and makes no claim about longer horizons.
Alter and Oppenheimer test whether processing fluency, the principle that people tend to prefer information that is easy to process, shows up in share prices. Three studies are reported, one in the laboratory and two analyses of naturalistic real-world stock market data. In all three, stocks with fluently pronounceable names robustly outperformed stocks with disfluent names over the short term. In one of the market analyses, an initial investment spread across a basket of fluently named shares returned a larger profit after a single day of trading than the same sum placed in a basket of disfluently named shares. The authors present this as evidence that a very simple cognitive variable, how easily a name is processed, can track short-term price movement, and they draw the broader conclusion that simple, cognitive approaches to modelling human behaviour sometimes outperform the typical, more complex alternatives. The abstract reports short-term movements only and makes no claim about longer horizons.
Written from the abstract, OpenAlex.
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Reproduced as it was written when this source was checked, figures and all.
Three studies; a laboratory study and two analyses of naturalistic real-world stock market data; fluently named stocks outperformed disfluently named stocks in the short term, with an initial investment of one thousand US dollars yielding a hundred and twelve dollars more after one day of trading for the fluent basket. Verified at the published record 2026-10-01. doi:10.1073/pnas.0601071103
Where we use it
- The Brand You Can Pronounce, Why We Look
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No link available. The citation as the article records it:
Alter, A. L., & Oppenheimer, D. M. (2006). 'Predicting short-term stock fluctuations by using processing fluency.' Proceedings of the National Academy of Sciences, 103(24), 9369-9372. Three studies; a laboratory study and two analyses of naturalistic real-world stock market data; fluently named stocks outperformed disfluently named stocks in the short term, with an initial investment of one thousand US dollars yielding a hundred and twelve dollars more after one day of trading for the fluent basket. Verified at the published record 2026-10-01. doi:10.1073/pnas.0601071103