Just Look: Knowing Peers with Image Representation 

75 Pages Posted: 10 Sep 2024

See all articles by Tomasz Kaczmarek

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

Kaczmarek, Tomasz and Pukthuanthong, Kuntara, Just Look: Knowing Peers with Image Representation  (August 23, 2024). Available at SSRN: https://ssrn.com/abstract=4934624 or http://dx.doi.org/10.2139/ssrn.4934624

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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