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Description of Fama/French Factors for Developed Markets

Daily Returns:

 

July 1, 1990 May 31, 2020

 

 

 

Monthly Returns:

 

July 1990 June 2020

 

 

 

Annual Returns:

 

19912019

 

 

 

Construction:

 

All returns are in U.S. dollars, include dividends and capital gains, and are not continuously compounded. Market is the return on a region's value-weight market portfolio minus the U.S. one month T-bill rate.

To construct the SMB and HML factors, we sort stocks in a region into two market cap and three book-to-market equity (B/M) groups at the end of each June. 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 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 the B/M breakpoints for the four regions to allocate the stocks of these regions 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).

SMB is the equal-weight average of the returns on the three small stock portfolios for the region minus the average of the returns on the three big stock portfolios,

SMB = 1/3 (Small Value + Small Neutral + Small Growth)
1/3 (Big Value + Big Neutral + Big Growth).


HML is the equal-weight average of the returns for the two high B/M portfolios for a region minus the average of the returns for the two low B/M portfolios,

HML = 1/2 (Small Value + Big Value)
1/2 (Small Growth + Big Growth).


The 2x3 sorts on size and lagged momentum to construct WML are similar, but the size-momentum portfolios are formed monthly. For portfolios formed at the end of month t1, the lagged momentum return is a stock's cumulative return for month t12 to month t2. The momentum breakpoints for a region are the 30th and 70th percentiles of the lagged momentum returns of the big stocks of the region.

The developed portfolios use developed size breaks, but we use the momentum breakpoints for the four regions to allocate the stocks of these regions to the developed portfolios. The independent 2x3 sorts on size and momentum produce six value-weight portfolios, SL, SN, SW, BL, BN, and BW, where S and B indicate small and big and L, N, and W indicate losers, neutral, and winners (bottom 30%, middle 40%, and top 30%).

WML is the equal-weight average of the returns for the two winner portfolios for a region minus the average of the returns for the two loser portfolios,

WML = 1/2 (Small High + Big High)
1/2 (Small Low + Big Low).

 

 

 

Stocks:

 

RmRf for July of year t to June of t+1 include all stocks for which we have market equity data for June of t. SMB and HML for July of year t to June of t+1 include all stocks for which we have market equity data for December of t1 and June of t, and (positive) book equity data for t1.

The six portfolios used to construct WML each month include stocks with prior return data. To be included in a portfolio for month t (formed at the end of the month t1), a stock must have a price for the end of month t13 and a good return for t2.