Assignment of Stock Market Coverage
Briana Chang and
Harrison Hong ()
No 23115, NBER Working Papers from National Bureau of Economic Research, Inc
Price efficiency plays an important role in financial markets. Firms influence it, particularly when they issue public equity. They can hire a reputable underwriter with a star analyst to generate public signals about profits, thereby reducing uncertainty and increasing valuations. We develop an assignment model of this labor market. The value of a match between firms, that differ in multiple dimensions, and agents, that differ in precision, is endogenously generated from a stock-market equilibrium. We characterize the multidimensional-to-one assignment and obtain predictions. Extensions allow firms to value efficiency for other reasons and apply to other labor markets like media-or-investor relations.
JEL-codes: G10 G12 G3 (search for similar items in EconPapers)
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