Common Analysts: Method for Defining Peer Firms

47 Pages Posted: 30 Dec 2012 Last revised: 10 Feb 2020

See all articles by Markku Kaustia

Markku Kaustia

Aalto University

Ville Rantala

University of Miami - Department of Finance

Date Written: September 23, 2019


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.

Keywords: Peer firms, industry classification, analysts

JEL Classification: G19, G39

Suggested Citation

Kaustia, Markku and Rantala, Ville, Common Analysts: Method for Defining Peer Firms (September 23, 2019). Available at SSRN: or

Markku Kaustia

Aalto University ( email )

P.O. Box 21210
Helsinki, 00101

Ville Rantala (Contact Author)

University of Miami - Department of Finance ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States

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