Industry Classification Benchmark - Explained
What is an Industry Classification Benchmark?
Written by Jason Gordon
Updated at April 17th, 2022
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Table of Contents
What is an Industry Classification Benchmark?How Does the the Industry Classification Benchmark Database Work?Comparing Industry Classification Benchmark With Other BenchmarksWhat is an Industry Classification Benchmark?
The Financial Times Stock Exchange (FTSE) and Dow Jones in 2005 created the Industry Classification Benchmark (ICB). It is a type of market classification for stocks that allow investors to compare economic trends. The FTSE totally belongs to the London Stock Exchange. The system is being used internationally by investors. Some of the sectors classifications are: Consumer Services, Oil and Gas, Telecommunications, Financials, Utilities, and Technologies
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How Does the the Industry Classification Benchmark Database Work?
The Industry Classification Benchmark database provides a comprehensive sector classification for investors globally. The ICB looks at the major source of revenue and the public information of any company before putting it under any of the four-tier classifications. The system offers the following classification structure:
- 10 industries
- 19 super-sector
- 39 sectors
- 114 subsectors
Some countries' stock exchange markets that have embraced the Industry Classification Benchmark include; Boursa Kuwait, Taiwan Exchange, Johannesburg Exchange, and Swiss Exchange. These stock exchange markets comprise more than 50% of the worlds market. The ICB is assisted by an independent external advisory committee.
Comparing Industry Classification Benchmark With Other Benchmarks
Another global classification standard is the Global Industry Classification Standard (GICS) created by Morgan Stanley Capital International (MSCI) and Standard & Poors (S&P) in 1999. It has a similar four-tier structure with the ICB. For example; the sector/company classification under the GICS includes- Information Technology, Telecommunication, Financials and Utilities. GICS sectors are more market-oriented.
