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Assignment of Stock Market Coverage

Listed author(s):
  • Briana Chang
  • Harrison Hong

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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 23115.

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Date of creation: Jan 2017
Handle: RePEc:nbr:nberwo:23115
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