Just Look: Knowing Peers with Image Representation
75 Pages Posted: 10 Sep 2024
Tomasz Kaczmarek
Poznan University of Economics and Business
Kuntara Pukthuanthong
University of Missouri, Columbia
Date Written: August 23, 2024
Abstract
What does an industry look like? We present a novel approach to assess firm similarity by analyzing four million visuals. Leveraging machine learning, we identify images representing companies' operations, forming Image Firm Similarities (IFS). IFS mirrors investor-defined peer groups and performs competitively against SIC, GICS, NAICS, and text-based similarity, akin to the brain's visual processing superiority. This outperformance appears in pair trading, diversification, and industry momentum strategies. The effectiveness of IFS is attributed to dynamic reclassification and high investor agreement within industries, leading to significant demand and supply effects on stock prices. IFS excels in industries with growth and intangibility.
Keywords: Images, Firm similarities, Diversification, Industry momentum
JEL Classification: G11, G12, G00
Suggested Citation: Suggested Citation
Tomasz Kaczmarek
Poznan University of Economics and Business ( email )
al. Niepodległości 10
Poznań, Poznań 61-875
Poland
Kuntara Pukthuanthong (Contact Author)
University of Missouri, Columbia ( email )
Robert J. Trulaske, Sr. College of Business
403 Cornell Hall
Columbia, MO 65211
United States
6198076124 (Phone)
HOME PAGE: https://www.kuntara.net/
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