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A comparison of industry classification schemes: A large sample study

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  • Hrazdil, Karel
  • Trottier, Kim
  • Zhang, Ray

Abstract

In a large sample setting, we compare four broadly available industry classification schemes in their effectiveness to group stocks with similar operating characteristics. We demonstrate the advantage of the Global Industry Classification Scheme to be consistent across different application schemes common to capital market research and across different groups of firms.

Suggested Citation

  • Hrazdil, Karel & Trottier, Kim & Zhang, Ray, 2013. "A comparison of industry classification schemes: A large sample study," Economics Letters, Elsevier, vol. 118(1), pages 77-80.
    • Handle: RePEc:eee:ecolet:v:118:y:2013:i:1:p:77-80
    DOI: 10.1016/j.econlet.2012.09.022
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    References listed on IDEAS

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    1. Kahle, Kathleen M. & Walkling, Ralph A., 1996. "The Impact of Industry Classifications on Financial Research," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(3), pages 309-335, September.
    2. Kathleen M. Kahle & Ralph A. Walkling, "undated". "The Impact of Industry Classifications on Financial Research," Research in Financial Economics 9607, Ohio State University.
    3. Fama, Eugene F. & French, Kenneth R., 1997. "Industry costs of equity," Journal of Financial Economics, Elsevier, vol. 43(2), pages 153-193, February.
    4. Boni, Leslie & Womack, Kent L., 2006. "Analysts, Industries, and Price Momentum," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 41(1), pages 85-109, March.
    5. Hrazdil, Karel & Zhang, Ray, 2012. "The importance of industry classification in estimating concentration ratios," Economics Letters, Elsevier, vol. 114(2), pages 224-227.
    6. Sanjeev Bhojraj & Charles M. C. Lee & Derek K. Oler, 2003. "What's My Line? A Comparison of Industry Classification Schemes for Capital Market Research," Journal of Accounting Research, Wiley Blackwell, vol. 41(5), pages 745-774, December.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Zura Kakushadze & Willie Yu, 2017. "Open Source Fundamental Industry Classification," Data, MDPI, vol. 2(2), pages 1-77, June.
    2. Tingting Zhang & Shunbo Yao & Jinna Yu & Assem Abu Hatab & Zhen Liu, 2020. "Effects of China’s Collective Forestland Tenure Reform Policies on Forest Product Firm Values," Land, MDPI, vol. 9(4), pages 1-20, April.
    3. Lysle Boller & Fiona Scott Morton, 2020. "Testing the Theory of Common Stock Ownership," NBER Working Papers 27515, National Bureau of Economic Research, Inc.
    4. Zura Kakushadze & Willie Yu, 2017. "Open Source Fundamental Industry Classification," Papers 1706.04210, arXiv.org, revised Dec 2017.
    5. Chung, Dennis Y. & Hrazdil, Karel & Trottier, Kim, 2015. "On the efficiency of intra-industry information transfers: The dilution of the overreaction anomaly," Journal of Banking & Finance, Elsevier, vol. 60(C), pages 153-167.
    6. Li, Scott & Liu, Qianqiu & Refalo, James, 2020. "Industry classification, product market competition, and firm characteristics," Finance Research Letters, Elsevier, vol. 36(C).
    7. Korn, Olaf & Möller, Philipp M. & Schwehm, Christian, 2019. "Drawdown measures: Are they all the same?," CFR Working Papers 19-04, University of Cologne, Centre for Financial Research (CFR).
    8. Bagnara, Matteo & Goodarzi, Milad, 2023. "Clustering-based sector investing," SAFE Working Paper Series 397, Leibniz Institute for Financial Research SAFE.
    9. Li, Scott, 2022. "Industry classification, industry momentum and short-term reversal," Finance Research Letters, Elsevier, vol. 48(C).

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    More about this item

    Keywords

    Industry classification; Homogeneity; Performance; GICS;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • G1 - Financial Economics - - General Financial Markets

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