Industry Classification Systems


Commercial industry classification systems include:

1.    The Global Industry Classification Standard (GICS)

It is an industry taxonomy for use by the global financial community. It is used as a

basis for S&P and MSCI financial market indexes in which each company is assigned to a sub-industry, and to a corresponding industry, industry group and sector, according to the definition of its principal business activity.

2. The Russell Global Sectors classification system

It uses a three-tier structure to classify global companies based on the products or services a company offers.

3. The Industry Classification Benchmark (ICB)

It categorizes individual companies into subsectors based primarily on a company's source of revenue or where it constitutes the majority of revenue.

Various governmental agencies use a number of classification systems to facilitate the comparison of data over time and among countries that use the same system. These systems include:

-    International Standard

Industrial Classification of All Economic Activities (ISIC) is used by the United Nations, its agencies and many countries in the world.

-    Statistical Classification of Economic Activities in the European Community (NACE) is the European version of ISIC.

-    Australian and New Zealand Standard Industrial Classification.
-    North American Industry Classification System.

The structures of these systems are very similar. The limitation of current classification system is that the narrowest classification unit assigned to a company generally cannot be assumed to constitute its peer group for the purpose of detailed fundamental comparisons or valuation.

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