Common Analysts: Method for Defining Peer Firms
Year: 2020
Type: article
Abstract: We develop a method for defining groups of peer firms on the basis of joint analyst coverage. Besides industry boundaries, analysts’ coverage choices reflect other aspects of firm relatedness such as business model. We find that the analyst-based method produces substantially more homogeneous groups of firms compared to common industry classifications, and has a number of other desirable properties. The paper has two broader implications. First, it demonstrates the advantages of a self-organizing approach to classification, as opposed to a hierarchical system. Second, it illustrates a new positive information production externality generated by the institution of security market analysis.
Authors: Markku Kaustia, Ville Rantala
Institutions: Aalto University, University of Miami
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3124427552