Financial Markets
The classification problem
Every risk model, every portfolio, and every market analysis begins with a classification decision that was inherited, never designed, and never examined. GICS, SIC, and NAICS organize economic data by surface appearance and historical convention, not by function. Two entities can look identical by industry code and be functionally unrelated, or look unrelated and be functionally identical — the result is organized confusion.
The application
FIS®, the Functional Information System, augments financial and economic data with standardized functional references, making business, employment, product, and service data unified, searchable, and stable across time and geography. The Syntax Stratified Indices are the first benchmark indices built on functional rather than conventional classification — a direct application of the Coordinate System to index construction and portfolio risk.
The evidence
“Systems Economics: A New Prescription for Risk Management” (Pensions & Investments, July 15, 2019) is the most complete public articulation of the FIS® methodology. See Courses for the full reading and keynote strand on financial classification, or the Lexicon for term-by-term definitions.