Market and Sector

1. What is the market

The broad market refers to the overall rise and fall of securities in a market. Generally speaking, the index calculation of the main assets in a market is performed using the arithmetic average method or weighted comprehensive method mentioned in the previous chapter.

For example, the stock market can be divided into the U.S. stock market in the United States and the A-share market in China. If the U.S. stock market refers to the overall ups and downs of the entire U.S. stock market, then you can refer to the index of the U.S. stock market, such as the S&P 500 Index that includes 500 constituent stocks.

2.Sector and Industry

Sector refers to the division of listed companies into different groups according to their respective business characteristics, which is convenient for traders and researchers to view a specific business type. For example, the technology sector refers to technology-related businesses, such as Apple and Microsoft, while the consumer goods sector includes companies such as Coca-Cola. A company can have multiple businesses, so depending on what its main business is, it can only be divided into one sector in the end.

For stocks, the Global Industry Classification Standard (GICS) and the Industry Classification Benchmark (ICB) are currently commonly used in most stock markets in the United States and internationally. In addition, the Thomson Reuters Business Classification (TRBC) and the North American Industry Classification Standard and Standard Industry Classification (SIC) used by the US government statistics department are commonly used.

Among them, GICS is the most used, the latest version reference
https://www.msci.com/gics

It can be seen from the above that GICS divides the sector into 11 categories, and there are 3 subdivisions below: Industry Groups, Industries, and Sub-Industries.

Among them, the sector is a relatively stable category, and generally there will not be much change. The current 11 categories are:

Telecommunication Services
Consumer Discretionary
Consumer Staples
Energy
Financials
Health Care
Industrials
Information Technology
Materials
real estate
Utilities

Here, real estate used to belong to the financial sector, but was later divided. Basically, all news media or data providers require this set of stock sector classifications.

Next is Industry. For example, click on the information technology Sector in the GICS link above, and you can see that it is divided into 3 Industry Groups, and then click “Software & Service” to see more detailed Industries.

However, when it comes to the classification of stock industries, various news media or data providers will not classify according to the Industry Groups, Industries, and Sub-Industries of GICS, but each has its own classification method.

Basically, in larger countries, the stock market will have corresponding funds to track various sectors, such as technology version ETFs of US stocks, biomedical version ETFs, etc. If you are optimistic about the trend of a certain sector, you can buy such ETFs.

3.Concept

The concept is more like a keyword and hotspot classification method, which can help investors quickly find market hotspots, and it is a classification method that short-term traders pay more attention to.

For example, the concept of “new crown epidemic” can not only include virus vaccine stocks and medical equipment stocks, but also remote office software company stocks, Internet e-commerce stocks, distance education stocks, etc.

There is no so-called official organization classification method for concepts. Each family has its own concept classification, but the overall copying of each other is similar.

The stock markets of developed countries also have concept-related ETF funds, such as the ETF for US stocks that specifically target 5G concepts: fivg

Leave a Reply

Your email address will not be published. Required fields are marked *