Global Industry Classification Standard - Explained
What is the GICS?
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Table of ContentsWhat is the Global Industry Classification Standard?How Does the Global Industry Classification Standards Work?
What is the Global Industry Classification Standard?
The Global Industry Classification Standard (GICS) is a standardized classification scheme in the financial and investment industry. GICS is a multi-tiered system that was created in 1991 by Morgan Stanley Capital International (MSCI) and Standard & Poor's (S&P) Dow Jones Indices. GICS is used for global financing purpose, it provides standardized industry definitions for classified stocks. It is a classification system for equities or stocks (both domestic and international) in order to make investment a little more efficient. GICS consists of several sectors and many of these sectors have been changed or added to over the years.
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How Does the Global Industry Classification Standards Work?
The Global Industry Classification Standard (GICS) is a multi-tiered standardized classification system. It has four levels which are; 11 sectors which are split into 24 industry groups, 69 industries, and 158 sub-industries. GICS was developed in 1999 to provide an industrial taxonomy across different sectors that would make investment more efficient. The first level of the classification which consists of eleven sectors include; Energy, information technology, Communication Services, materials, Healthcare, Consumer Discretionary, Consumer Staples, Utilities, Real Estate, Financials and industrials. The three other levels are subsets of these 11 sectors. Morgan Stanley Capital International (MSCI) and Standard & Poor's (S&P) Dow Jones Indices developed GICS in 1999 for the purpose of classifying stocks using the standardized industry definitions. GICS capture the vast industry sectors in order to guide investors and other shareholders involved in investment processes. Since its establishment, GICS has been widely used in the classification of stocks which has been helpful to brokers, asset managers and investors. GICS shows the current states of industries that participate in the global market, it accounts for over 95% of listed companies and over 26,000 stocks. However, due to recent changes and expansion of different industries, annual reviews are carried out to ensure that the classifications of GICS are accurate.