Complexity Aversion When Seeking Alpha | Zendy

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Complexity Aversion When Seeking Alpha

Author(s) -

Tarik Umar

Publication year - 2017

Publication title -

ssrn electronic journal

Language(s) - English

Resource type - Journals

ISSN - 1556-5068

DOI - 10.2139/ssrn.3006405

Subject(s) - alpha (finance) , inequity aversion , economics , psychology , mathematics , clinical psychology , construct validity , mathematical analysis , inequality , psychometrics

Does complex language lead investors to stop reading and miss valuable news? I conduct a global field experiment with Seeking Alpha that randomly assigns to investors different titles for the same news article. Investors are less likely to open news when titles have more characters, longer words, and more syllables. Standard-deviation increases in length lead to 11%-fewer views. Optical length matters rather than content differences. Length is more off-putting for less-sophisticated investors, when aggregate volatility is higher, and when earnings surprises are smaller. Complementing these results, firm managers shorten titles for more positive earnings announcements by omitting common words.

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