Patriotic name bias and stock returns

Abstract

Companies whose names contain the words "America(n)" or "USA" earn positive abnormal returns of about 6% per annum during the Second World War, the War in Korea and the War on Terror. These abnormal returns are not realized immediately upon the outbreak of each of the wars but are accumulated gradually during wartime. Given that no such effect is observed for the Vietnam War, we hypothesize that major, victorious wars arouse investors' patriotic feelings and cause them to gradually and perhaps subconsciously gravitate toward stocks whose name has a patriotic flavor.

Aye Corona! The Contagion Effects of Being Named Corona during the COVID-19 Pandemic

“…A classic in this genre is the renaming of companies to take advantage of the dot.com boom, documented in Cooper et al [2001]. Benos and Jochec [2013] found evidence that US companies whose names contain the words "America" or "USA" earn positive abnormal returns of about 6% per annum during World War II, the Korean War, and recent Middle East conflicts. Kot [2011] investigated similar response in Hong Kong, Biktimirov and Durrani [2017] in Canada, Mase [2009] for companies in the UK and Kadapakkam and Misra [2007] found evidence supporting significant declines in trading volume and prices on dates when tickers were changed for companies.…”

Saudi Aramco’s IPO: The motivational factors involved in the purchase of Saudi Aramco shares

“…Similarly, Wel et al (2018)'s study of the Malaysian consumers also establishes a similar pattern concluding that patriotism shows a significant relationship with consumer's buying intention. Furthermore, there is empirical evidence that suggests individual investors' patriotism leads them to invest in stocks of the companies with 'patriotic flavor' (Benos & Jochec, 2013).…”

Equity Home Bias: A Review Essay

“…Morse and Shive () propose two channels through which patriotism affects investor's choices: (1) patriotism leads investors to believe that domestic stocks are superior to foreign stocks, and therefore, they invest in domestic stocks, or (2) patriotism leads investors to derive additional utility from supporting the domestic economy, and therefore, they invest in domestic stocks, in spite of knowing that they are suboptimal investments. Similarly, Benos and Jochec () show that patriotism positively affects domestic stock returns.…”