Name Biases Affecting Stock Performance: The Case of Russian Stock Market

Recent research has revealed that alphabetical name ordering affects stocks performance without substantial differences in firm characteristics (e.g., Itzkowitz, Itzkowitz, 2015; Jacobs and Hillert, 2016). The results turn out to be relevant for developed capital markets. Using the data on 193 Russian firms, this study is the first to explore the implications of alphabetical bias in Russian stock market. I hypothesize that “early alphabet stocks” will show greater turnover, liquidity rates, as well as higher valuations than “later alphabet stocks” due to the everyday convention of presenting information in alphabetically sorted manner. The results partly support the stated hypothesis: the analysis shows that alphabetic ordering has a significant and robust effect on stock-level turnover rates. For instance, the beginning 5% of shares in an alphabetically sorted list based on company names show turnover rates about 45% greater than stock located in the fourth quarter. However, the original hypothesis about liquidity rates and share values is not supported. For these, the evidence for alphabetic bias is ambiguous, with no impact in terms of ticker alphabetic sorting, and with certain impact on stock-level illiquidity rates with name sorting and adjustment for the effect of outliers. Assuming that the effect of alphabetic bias is highly dependent on the amount of information encountered by individuals, the bias was expected to be weaker in the Russian setting as compared to developed capital market. This is due to the relatively small universe of firms present on the market, which makes poor foundation for alphabetic bias. Further research might be performed at some point in the future to check the bias dependency on the amounts of information available, as well as the level of technological progress.