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While I prepared some quick and lazy charts picking just the first 10 symbols out of the SP500 for this other question I observed, that the first 10 symbols (figure 1) actually outperformed the larger selection (100 symbols in figure 2) by quite a bit.

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Figure 1: Cumulated backtesting performance of first 10 alphabetically sorted symbols in SP500

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Figure 2: Cumulated backtesting performance of first 100 alphabetically sorted symbols in SP500

At first I put the difference down to chance but later remembered that start-ups are advised to choose names early in the alphabet. A quick google search turned up some recent research on this anomaly. And as discussed elsewhere on the site some anomalies persist quite some time.

While my observation is most likely very biased (Apple is part of the first 10 symbols) I am wondering if anybody else has observed anything similar in other markets or instruments or whether there is more related research. It would be of particular interest to see if, and why, any such affect would be stable over time or periodic (e.g., occurring during certain phases in a business cycle).

Edit: note, last 10 SP500 stocks would have performed even better then the first...

Can you share research or own observations regarding such an "alphabet effect"?

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There are a couple of nice papers about the dot-com effect by Michael Cooper: full list, paper1, paper2

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  • $\begingroup$ Interesting set of papers. I didn't look at them all, but did they study just to the change of a name rather or also the change to name earlier in the alphabet? $\endgroup$ – RndmSymbl Nov 6 '14 at 20:03

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