Predicting short-term stock fluctuations by using processing fluency

Proc Natl Acad Sci U S A. 2006 Jun 13;103(24):9369-72. doi: 10.1073/pnas.0601071103. Epub 2006 Jun 5.


Three studies investigated the impact of the psychological principle of fluency (that people tend to prefer easily processed information) on short-term share price movements. In both a laboratory study and two analyses of naturalistic real-world stock market data, fluently named stocks robustly outperformed stocks with disfluent names in the short term. For example, in one study, an initial investment of 1,000 US dollars yielded a profit of 112 US dollars more after 1 day of trading for a basket of fluently named shares than for a basket of disfluently named shares. These results imply that simple, cognitive approaches to modeling human behavior sometimes outperform more typical, complex alternatives.

Publication types

  • Research Support, U.S. Gov't, Non-P.H.S.

MeSH terms

  • Behavior / physiology*
  • Female
  • Financial Management*
  • Humans
  • Investments*
  • Mental Processes*
  • Models, Psychological
  • Models, Theoretical
  • Random Allocation