Stock Classification Beyond Sectors and Industries
Summary
The document explains that broad sector and industry labels may be too coarse for some investment or research tasks, and asks about more detailed classifications of stocks. The response describes several established taxonomies that divide companies from sectors into industries and subindustries. It names GICS, ICB, and Refinitiv Business Classification as commonly used company classifications, and distinguishes them from NAICS and ISIC, which are better suited to classifying economic activities within companies.
It also notes that data platforms such as Bloomberg and Eikon can provide multiple classification schemes for a chosen universe. The respondent considers GICS especially common in practice, while presenting that as a personal impression rather than a measured comparison. No taxonomy is demonstrated or evaluated for a particular portfolio. The practical guidance is to select a scheme that fits the use case and, if its categories are too broad, consider maintaining custom overrides for selected companies.
Key ideas
- Stock taxonomies commonly divide broad sectors into progressively narrower industries and subindustries.
- GICS, ICB, and Refinitiv Business Classification are presented as company classification systems.
- NAICS and ISIC are described as more suited to classifying business activities than whole companies.
- Financial data platforms may provide several classification schemes for the same stock universe.
- Researchers may need to customize classifications when standard categories lack the desired detail.
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Full text
# Finer classification of stocks beyond sector/industry # Finer classification of stocks beyond sector/industry There are classifications of stock in sector/industry. But such classifications are rather coarse. https://eresearch.fidelity.com/eresearch/markets_sectors/sectors/sectors_in_market.jhtml Stocks in an industry can be further classified. For example, in cybersecurity, there are the following stocks. https://www.fool.com/investing/stock-market/market-sectors/information-technology/cybersecurity-stocks/ Is there a centralized database with a finer classification of all stocks? ## Answer by Dimitri Vulis (score 2) https://quant.stackexchange.com/a/66554 There are many taxonomies, not very different from one another, all of which start with 10-12 sectors, and further divide them into industries and subindustries. Some popular industry classifications are: Global Industry Classification Standard (GICS) - https://en.wikipedia.org/wiki/Global_Industry_Classification_Standard , MSCI document - developed by Morgan Stanley Capital International (MSCI) and Standard & Poor's (S&P) in 1999. S&P tries to assign every public company to a GICS industry. My subjective impression is that GICS is the most often used in practice. Industry Classification Benchmark (ICB) - https://en.wikipedia.org/wiki/Industry_Classification_Benchmark - created by Dow Jones and FTSE in 2005. Used by NYSE, NASDAQ, and many other stock exchanges. The Refinitiv Business Classification (TRBC) https://en.wikipedia.org/wiki/The_Refinitiv_Business_Classification is the Reuters industry classification that was rebranded when Reuers spun off Refinitiv. North American Industry Classification System (NAICS) https://en.wikipedia.org/wiki/North_American_Industry_Classification_System is better suited for classifying activities within a company, although many people mis-use it to classify entire companies. International Standard Industrial Classification of All Economic Activities (ISIC) https://en.wikipedia.org/wiki/International_Standard_Industrial_Classification is the United Nations taxonomy. Like NAICS, it is better suited for activities than for entire companies. If you have access to a Bloomberg terminal or Eikon, then you should have no trouble getting multiple classifications for all the stocks you're considering. However you may decide that you don't like any available classification because none are granular enough for whatever your needs are, and you may choose to override some classifications with your own.
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