Name-Based Behavioral Biases: Are Expert Investors Immune?

Abstract

The market comprises investors with a broad range of expertise. As a result, investors may make decisions differently from one another. Research reveals that investors use name-based heuristics, or short-cuts, including alphabetical ordering (Itzkowitz, Itzkowitz, and Rothbort []), name fluency (Anderson and Larkin [], Green and Jame []), and name memorability (Grullon, Kanatas, and Weston []) when trading stocks, resulting in irrational decisions. Because experts and novices process information differently, name-based biases may not affect all investors equally. The authors test and confirm the hypothesis that, compared to novices, expert investors are relatively immune to name-based biases.

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