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Company Similarity using Large Language Models

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arxiv 2308.08031 v1 pith:AG6M6SE6 submitted 2023-08-15 q-fin.ST q-fin.CPstat.AP

classification q-fin.STq-fin.CPstat.AP
keywords embeddingsclassificationscompaniescompanyfinancialgicssimilarsimilarity
verification ladder T0 review T1 audit T2 compute T3 formal
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Identifying companies with similar profiles is a core task in finance with a wide range of applications in portfolio construction, asset pricing and risk attribution. When a rigorous definition of similarity is lacking, financial analysts usually resort to 'traditional' industry classifications such as Global Industry Classification System (GICS) which assign a unique category to each company at different levels of granularity. Due to their discrete nature, though, GICS classifications do not allow for ranking companies in terms of similarity. In this paper, we explore the ability of pre-trained and finetuned large language models (LLMs) to learn company embeddings based on the business descriptions reported in SEC filings. We show that we can reproduce GICS classifications using the embeddings as features. We also benchmark these embeddings on various machine learning and financial metrics and conclude that the companies that are similar according to the embeddings are also similar in terms of financial performance metrics including return correlation.

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  1. LLM Latent Edge Measurement: Point-in-Time Economic Graphs for Quantitative Investing from Corporate Disclosures

    stat.AP 2026-07 conditional novelty 6.0 of 10

    An LLM pipeline extracts a weighted, directed, point-in-time firm network from public corporate filings, with claimed 88% audited precision on high-weight edges and recovery of cross-sector economic links.

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