Investors are way more likely to buy a stock if some totally unrelated company with the same price happens to be doing well.
SSRN · March 17, 2026 · 6305280
The Takeaway
The study reveals a weird psychological shortcut called 'price-based categorical thinking' where humans group stocks into buckets based on their dollar price (e.g., the '$10 stocks'). If an investor has a good experience with one $10 stock, they irrationally shift their attention and demand to other $10 stocks, regardless of industry or fundamentals.
From the abstract
Price-based categorical thinking and experience effects jointly imply that investor demand for a stock would be higher after similarly priced stocks earned high returns in the past. We show that price-comparable peers' recent performance positively predicts focal stocks' subsequent returns. A long-short strategy exploiting this price-based return predictability delivers 1.13% per month. Using stock splits as a quasi-natural experiment that reshapes price categories and disrupts experience associ