Common Analyst –Based Method for Defining Peer Firms
نویسندگان
چکیده
We develop a method for defining groups of peer firms based on having sufficiently many common sell-side analysts. Besides industry boundaries, analysts’ coverage choices can reflect other important aspects of firm relatedness. We find that the common analysts -method produces substantially more homogenous groups of firms compared to standard 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 potential positive information production externality generated by the institution of security market analysis.
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