FUN Index

Gary Smith, a professor at Pomona College in California does very interesting studies on stock markets. One of his creations is a FUN Index of catchy stock symbols, tagged to American stocks. He asked his finance students to pick their favourite stock symbols among the 33,000 ticker symbols that have been used by companies over the years. The students chose 74 with symbols like MOO, HOG, and JAIL. Smith took that selection and tested their performance over a 20-year period. Surprisingly, the FUN Index beat the Nasdaq/NYSE index portfolio by a huge margin. Could clever symbols be used as tools to predict the future performance of stocks?
The main problem with the study is what statisticians call survivorship bias. The FUN Index was selective, based on what the students thought was funny. Several memorable symbols were left out, such as FAX and GROW. Also, some 65% of the stocks in the FUN Index no longer trade (for example, GEEK, BEER, and LUCK), or have merged with another company. This was another way in which the survivorship bias crept in. Besides, for every winner like YUM, GOLD, KEY and LU, you have losers like DRUG, WIN, MAD and ASAP. Surely, you cannot escape the fundamentals of a company. But once you have done your basic research, a unique symbol may offer an edge. Maybe a smart company tends to choose a smart symbol.

  • Like this story? Get our top stories by email.

    User 

    We are listening!

    Solve the equation and enter in the Captcha field.
      Loading...
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email

    BUY NOW

    online financial advisory
    Pathbreakers
    Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
    online financia advisory
    The Scam
    28 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
    Moneylife Online Magazine
    Fiercely independent and pro-consumer information on personal finance
    financial magazines online
    Stockletters in 4 Flavours
    Outstanding research that beats mutual funds year after year
    financial magazines in india
    MAS: Complete Online Financial Advisory
    (Includes Moneylife Online Magazine)