Speakers: Kuntara Pukthuanthong (University of Missouri) and Tomasz Kaczmarek (Poznan University of Economics and Business)
Title: Just Look: Knowing Peers with Image Representation
Abstract: We introduce a new measure of firms' similarity. Using two million photographs, we apply machine learning techniques to identify graphical objects that best characterize companies' businesses and use them to create image industry classifications (IIC). We show that, in the age of unquestionable popularity of the image as a means of business communication, our new measure of similarity is linked to how investors define peers. Just as the human brain processes pictures better than numbers and text, IIC provides the highest diversification benefits and industry momentum profits to the portfolios among industry classifications based on SIC, GICS, NAICS, and text similarity. Our image classifications (IIC) perform well with industries whose value is driven by expectation, growth, and intangibility. The agreement within (across) an image-classified industry is highest (lowest), generating the highest impact of aggregated demand and supply on the stock price. This explains why IIC performs well in diversification and industry momentum strategies.
Date: March 24th, 2023, 15:00 (Warsaw time)
Place: Teams webinar
