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, four book-to-market equity (B/M) and four Investment (Inv) 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%. Stocks in each size group are allocated independently to four B/M groups and four Inv groups using quartile breakpoints specific to the size group.

The developed portfolios use developed size breaks, but we use B/M, Inv 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, Inv breakpoints. The 32 value-weight size-B/M-Inv portfolios for a region are the intersections of the independent 2x4x4 size, B/M and Inv sorts.