Sell! Buy! Markets Hate Complex Headlines

Analyzing Seeking Alpha data, Umar noted the page views each title received and the number of investors who scrolled to the end of the report. He also used the comments that followed the stock report to measure variation in the sophistication of investors following the company—he assumes that commenters who also contributed their own reports to Seeking Alpha are more sophisticated than those who only read others’ submissions.

Investors, he finds, greatly prefer short, simple headlines. A title that was one standard deviation longer, about a third longer, received 12 percent fewer page views.

Seeking Alpha’s mainly retail-investor audience is less likely to have the time and resources to devote to learning about stocks like the pros. They are more likely to rely on heuristics: common shortcuts or mental models that guide human behavior. These models can be helpful, such as when emergency medics quickly diagnose life-threatening conditions from a handful of symptoms. But they can also be misleading, steering modern-day investors to devote undue attention to the negative slant of an investment report.

However, even highly educated academics paid less attention to longer titles. Umar finds that on the Social Science Research Network database, papers with twice the title length received 11 percent fewer views, 13 percent fewer downloads, and 4 percent fewer citations. Umar also finds a preference for negative titles.

These variations in attention translate into market dynamics. In a separate analysis, Umar examined 305,000 earnings press releases issued from 1992 to 2015. He finds that a longer title on a press release was correlated with less turnover, fewer trades, lower volatility, and temporarily lower returns in the shares of the company announcing the news. The effect on returns completely reversed within a month. Recognizing these predictable biases gives investors one more way to outwit the herd.