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Assignment of Stock Market Coverage

Briana Chang and Harrison Hong ()

No 23115, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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)
New Economics Papers: this item is included in nep-fmk
Date: 2017-01
Note: AP CF
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