What is the difference between sics1 and sics2 on Compustat Segments?
Posted: 17 January 2013 04:01 AM   [ Ignore ]
Newbie
Rank
Total Posts:  17
Joined  2013-01-12

What is the difference between sics1 and sics2 on Compustat Segments? WRDS only says that it’s about Primary and secondary SIC code, but why is there such as thing as primary and secondary? I thought whether a segment belongs to an industry or not should be clear…

Profile
 
 
Posted: 17 January 2013 09:00 AM   [ Ignore ]   [ # 1 ]
Administrator
Avatar
RankRankRankRank
Total Posts:  901
Joined  2011-09-19

hi Chris,

Yes, this stuff is confusing. How I understand it is that the primary segment identifier fits the company best, and the secondary SIC would be the ‘next best’ fitting industry.

A little warning: this data is very dirty. For example, for firms that have disclosed a single segment, the segment SIC very often does not match funda SICH (or funda company SIC). (You would expect these always to be the same, right? One company operating one segment..)

best regards,

Joost

 Signature 

To reply/post new questions: Please use the group WRDS/SAS on Google Groups! http://groups.google.com/d/forum/wrdssas

Profile
 
 
Posted: 19 January 2013 05:37 AM   [ Ignore ]   [ # 2 ]
Newbie
Rank
Total Posts:  17
Joined  2013-01-12

Thank you. That was what I thought as well. here is the Explanation of WRDS:


...Standard & Poor’s will attempt to assign both a primary and secondary SIC code for each industry segment. However, either one or both SIC items may be zero in some cases.

Only one SIC code will be assigned if one of the following situations occur:
• Only one SIC category’s operations of an industry segment is reported by the company.
• Only a general description of an industry segment’s activities is reported by the company.
Both SIC code fields will be zero when a company that reports an industry segment which is classified as “other” and no description of this industry segment’s activity is provided.

The primary segment SIC is the more prevalent description of a segment, the secondary can detail other business operations that are part of the segment.
As an example, Sara Lee Corp (SLE), has a segment named “North American Retail Bakery” and their primary and secondary SIC codes are as listed:
SIC1—2053 Frozen Bakery Pds, Ex Bread
SIC2—2051 Bread, Bakery Pds, Ex Cookie

The “North American Retail Bakery” segment, makes frozen bakery products and to a lesser extent 2051 Bread, Bakery Pds, Ex Cookie.

Segment SIC codes are assigned based on sales.  To get a secondary SIC for a segment, that segment must have sales greater than zero.  If a break out is not reported for the segment, the order of reporting is used to determine if a secondary SIC is necessary.

As for industry membership, it is the overall company SIC code (SIC) that determines industry membership.

Profile
 
 
Posted: 19 January 2013 10:26 AM   [ Ignore ]   [ # 3 ]
Administrator
Avatar
RankRankRankRank
Total Posts:  901
Joined  2011-09-19

hi Chris,

ok, thanks, that makes sense.

best regards,

Joost

 Signature 

To reply/post new questions: Please use the group WRDS/SAS on Google Groups! http://groups.google.com/d/forum/wrdssas

Profile
 
 
Posted: 31 July 2013 12:26 AM   [ Ignore ]   [ # 4 ]
Newbie
Rank
Total Posts:  9
Joined  2013-07-31

Good Information. I was having the question right in mind.

Profile