Common Analysts: Method for Defining Peer Firms

Markku Kaustia*, Ville Rantala

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review


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 homogenous 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.

Original languageEnglish
Pages (from-to)1505-1536
JournalJournal of Financial and Quantitative Analysis
Issue number5
Early online date6 Jul 2020
Publication statusPublished - Aug 2021
MoE publication typeA1 Journal article-refereed


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