The Impact of a Company’s Name on its Stock Price
The Words “Technology” and “Holdings” Boost Stocks
Stock market activity this year reveals that a company’s name may have a significant impact on its stock price.
Companies with the words “technology” or “technologies” in their names have seen their shares rise by 18% year-to-date and 35% over the past 12 months. Additionally, companies with the word “holdings” in their names have seen their shares go up 4% year-to-date. This could be because “holdings” implies diversification, which is attractive to investors during times of uncertainty.
The Words “International” and “Industries” May Hurt Stock Prices
In contrast, companies whose names contain the words “international” or “global” have seen a 15% year-to-date drop, and a 4% year-over-year decline, perhaps because investors are worried about the pandemic’s impact on global business.
Companies with “industries” or “motors” in their names have fallen 8% and 9% year-to-date, respectively. These words tend to be associated with old economy sectors.
It’s important to remember that correlation does not imply causation when examining these trends. Many automakers with the word “motors” in their name have struggled during the ongoing pandemic, but that would likely be the case even if they had different names. However, it is interesting to note that Tesla (TSLA), which has outperformed its fellow carmakers on the stock market, does not have the word “motors” in its name.
The idea that company names impact investor psychology is nothing new. In a 2000 academic study, analysts found that adding “.com” to the end of a company’s name boosted the value of its stock. It is possible that during times when it is difficult to predict the future of the economy, the impact of a company’s name on investor sentiment is even stronger than usual.
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