Portfolio Design

Advanced concepts in stock investment portfolio design.  Fundamentals, technical analysis and many other related topics are discussed.

Maintaining Continuity Between Old and New GICS Sectors

In August, changes were made to the Global Industry Classification Standard (GICS), the most significant change being the move of the subsector Real Estate out from the Financial sector, making it the eleventh sector.

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The new GICS sectors presents a discontinuity from August 2016 to September 2016.  The easiest way to demonstrate the problem is to plot total aggregate employees for one of the Portfolio123 standard universes such as the PRussell3000 using a custom series. The universe is reduced to the Financial sector using the rule UnivGICS(40).  40 is the code for the financial sector.  Then the aggregate sum of total employees for all companies in the financial sector are plotted using the rules shown below.

Custom series rules for generation of the total number of employees for the Financial sector

The chart (below) shows that the financial sector dropped from a total of 3.25  million down to under 3 million employees at the end of August.

Financial sector total employees drops off after August 2016

The discrepancy can be handled using the UnivGICS(...) rule in a custom series, or GICS(...) rule in simulations, custom universes, and screens. If you wish to use the old Financial sector into the future then you should adjust your rule to GICS(40,60), 40 - Financials plus 60 - Real Estate.

 Custom series rules for generation of the total number of employees for the old Financial sector extended into the future

The old Financial sector total employees maintains continuity after August 2016

Below shows the rule for maintaining the old Real Estate sector into the future. Note that Mortgage REITs remain under the Financial sector with the new GICS mapping.  The rule is GICS(4040,402040,60), 4040 - (Old) Realestate plus 402040 Mortgage REITs plus 60 - (New) Real Estate.

Custom series rules for generation of the total number of employees for the old Real Estate sector extended into the future

The old Real Estate sector total employees maintains continuity after August 2016


The new Financial sector is extended into the past using the rule GICS(4010,4020,4030), 4010 - Banks plus 4020 - Diversified Financials plus 4030 - Insurance.

Custom series rules for generation of the total number of employees for the new Financial sector maintaining continuity with the past

The new Financial sector total employees maintains continuity with the past


Last but not least, the new Real Estate sector can be extended into the past using the rule GICS(404010, 40402010, 40402020, 40402035, 40402040, 40402045, 40402050, 40402060, 40402070, 404030, 60), (Old) Real Estate except for Mortgage REITs plus (NEW) Real Estate.

Custom series rules for generation of the total number of employees for the new Real Estate sector maintaining continuity with the past

The new Real Estate sector total employees maintains continuity with the past