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
The 2x3 sorts on size and lagged momentum to construct WML are formed monthly.
For portfolios formed at the end of month t–1, the lagged momentum return is a stock's cumulative
return for month t–12 to month t–2. 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
WML = 1/2 (Small High + Big High)
– 1/2 (Small Low + Big Low).