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Industry classification, product market competition, and firm characteristics

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  • Li, Scott
  • Liu, Qianqiu
  • Refalo, James

Abstract

We examine twelve industry classifications from three classification systems: SIC (including Fama French classifications), NAICS and GICS, over the period from 1963 to 2017. The results show different classifications can generate conflicting descriptions of product market competition and firm characteristics across product market competition levels. We also demonstrate that the choice of industry classification and sample period are the causes of opposite empirical results that support the conflicting theories of Schumpeter. We find Fama French 48 and eight-digit GICS to be the only classifications that generate consistent performance of industry portfolios formed by production market level, throughout the sample period.

Suggested Citation

  • Li, Scott & Liu, Qianqiu & Refalo, James, 2020. "Industry classification, product market competition, and firm characteristics," Finance Research Letters, Elsevier, vol. 36(C).
    • Handle: RePEc:eee:finlet:v:36:y:2020:i:c:s1544612319301977
    DOI: 10.1016/j.frl.2019.101319
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    Cited by:

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    2. Baek, Chaeyoon & Baek, Seungho & Glambosky, Mina, 2024. "Macroeconomic impact and stock returns' vulnerability by size, solvency, and financial distress," Finance Research Letters, Elsevier, vol. 59(C).
    3. Haohan Zhao & Heping Xiong & Jikang Chen, 2021. "Regional Comparison and Strategy Recommendations of Industrial Hemp in China Based on a SWOT Analysis," Sustainability, MDPI, vol. 13(11), pages 1-16, June.
    4. Zhang, Jinhua & Mao, Rui & Wang, Jieyu & Xing, Mengying, 2021. "The way back home: Trading behaviours of foreign institutional investors in China amid the COVID-19 pandemic," Pacific-Basin Finance Journal, Elsevier, vol. 68(C).
    5. Li, Scott, 2022. "Industry classification, industry momentum and short-term reversal," Finance Research Letters, Elsevier, vol. 48(C).
    6. Kęstutis Peleckis, 2022. "Application of the Fuzzy VIKOR Method to Assess Concentration and Its Effects on Competition in the Energy Sector," Energies, MDPI, vol. 15(4), pages 1-16, February.

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    More about this item

    Keywords

    Industry classification; Industry concentration; Product market competition;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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