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Commonality in Analyst Coverage and Information Diffusion

I show that information diffusion emerges endogenously in the equity market due to strategic complementarities in analysts’ information production. I construct an information network of the equity market by connecting firms with commonalities in analyst coverage. Using the friendship paradox phenomenon, I identify stocks for which equilibrium information production is higher, and find that returns of these stocks lead other stocks. This effect is not completely explained by ex-ante firm characteristics and industry effects.