Kenneth R. French - Description of Fama/French Factors (original) (raw)

Construction:

All returns are in U.S. dollars, include dividends and capital gains, and are not continuously compounded. We sort stocks in a region into two market cap and three book-to-market equity (B/M) groups at the end of June of each year t.

Big stocks are those in the top 90% of June market cap for the region, and small stocks are those in the bottom 10%. The B/M breakpoints for big and small stocks in a region are the 30th and 70th percentiles of B/M for the big stocks of the region.

The developed portfolios use developed size breaks, but we use B/M breakpoints for each region to allocate the region's stocks to the developed portfolios. Similarly, the developed ex us portfolios use developed ex us size breaks and regional B/M breakpoints. The independent 2x3 sorts on size and B/M produce six value-weight portfolios, SG, SN, SV, BG, BN, and BV, where S and B indicate small or big and G, N, and V indicate growth (low B/M), neutral, and value (high B/M).