English

Company Similarity using Large Language Models

Statistical Finance 2023-08-17 v1 Computational Finance Applications

Abstract

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.

Keywords

Cite

@article{arxiv.2308.08031,
  title  = {Company Similarity using Large Language Models},
  author = {Dimitrios Vamvourellis and Máté Toth and Snigdha Bhagat and Dhruv Desai and Dhagash Mehta and Stefano Pasquali},
  journal= {arXiv preprint arXiv:2308.08031},
  year   = {2023}
}

Comments

8 pages, 2 figures, 2 tables

R2 v1 2026-06-28T11:56:32.328Z