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GICS or ICB, how different is similar?

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  • Maximilian A M Vermorken

    (Centre Emile Bernheim, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles)

Abstract

A number of different classification systems exist to assist portfolio managers in diversifying exposure to industry- or sector-specific risk. Recently a new system was added, the Industry Classification Benchmark (ICB). Both this framework and the Global Industry Classification System (GICS) are very popular among practicioners. The two frameworks are reported to be similar in methodology and equivalent in use. This article therefore assesses three questions concerning these two systems: the homogeneity of the classes, their relation to market returns and the stability of the sectors for variations in the market. The results indicate that differences do exist between the two systems. These differences, however, are concentrated around individual sectors and are the result of classification decisions inherent in the methodology. For large-cap companies, such as the sample used in this study, the impact of these differences is relatively limited, which does not guarantee the same result for mid- and small-cap stocks. The two methodologies are therefore globally similar and locally different.

Suggested Citation

  • Maximilian A M Vermorken, 2011. "GICS or ICB, how different is similar?," Journal of Asset Management, Palgrave Macmillan, vol. 12(1), pages 30-44, April.
    • Handle: RePEc:pal:assmgt:v:12:y:2011:i:1:d:10.1057_jam.2010.4
    DOI: 10.1057/jam.2010.4
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    References listed on IDEAS

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    Cited by:

    1. Zura Kakushadze & Willie Yu, 2017. "Open Source Fundamental Industry Classification," Papers 1706.04210, arXiv.org, revised Dec 2017.

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