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Assignment of Stock Market Coverage

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  • Briana Chang
  • Harrison Hong

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.

Suggested Citation

  • Briana Chang & Harrison Hong, 2017. "Assignment of Stock Market Coverage," NBER Working Papers 23115, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:23115
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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G3 - Financial Economics - - Corporate Finance and Governance

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