Skip to content
All library documents

Constructing the Fama–French Size and Book-to-Market Portfolios

Article Quant Q&A · Author: Ehtesham Fazal
Read the original

Summary

The document addresses how to calculate returns for the six Fama–French portfolios formed by combining size groups with book-to-market groups. It says the published portfolio returns are available from the researchers’ websites and points readers seeking to recreate them to the original paper for the full procedure.

Its brief outline describes sorting stocks into groups by each variable, forming portfolios from the resulting classifications, and aggregating performance for comparison. This gives a high-level sketch of portfolio construction but does not specify the exact breakpoints, rebalancing schedule, weighting rules, or return calculations needed to reproduce the standard portfolios. The response therefore serves as a pointer and orientation, not a complete implementation guide, and it does not provide empirical results.

Key ideas

  • The six portfolios combine size and book-to-market classifications.
  • Published portfolio returns can be obtained from the researchers' websites.
  • A reconstruction requires sorting stocks by the relevant variables and aggregating portfolio returns.
  • The short outline omits implementation details such as breakpoints and weighting rules.

Tags

Factor investingPortfolio constructionEquitiesBacktesting
Full text
# Fama French Three Factor


# Fama French Three Factor












How to calculate the value weighted or equally weighted returns for the six portfolios SL,SM,SH,BL,BM,BH of fama french 3 factor model?

## Answer by Vitomir (score 0, accepted)

https://quant.stackexchange.com/a/45889

They are available on their websites.

If you want to build them by yourself, the procedure is well described on their original paper.

In short:

- divide the sample in deciles for each variable

- build long-short portfolios based on these deciles

- aggregate and compare perfomances

Overall, I think you should further detail your question.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.