Finding and Reconstructing the Fama–French HML Value Factor

Summary

The document clarifies where to obtain the Fama–French value factor, HML, and how it relates to portfolios sorted by company size and book-to-market. The six size and book-to-market portfolio returns can be used to reproduce HML, so labels such as the intermediate size groups belong to the underlying portfolio construction rather than representing separate factor returns. For direct use, the Fama–French three-factor or five-factor dataset provides the HML time series, reported as excess returns over the risk-free rate.

Reconstructing HML from the six portfolios can help a researcher understand the factor's construction. The answer points readers to the factor descriptions and supporting papers for the exact methodology, but it does not spell out the full calculation or provide return data. The suggested direct download is therefore the practical route when the aim is simply to obtain the factor series; replication is useful when the construction itself is under study.

Key ideas

• The Fama–French three-factor and five-factor datasets include the HML value factor series.
• HML is reported as an excess return over the risk-free rate.
• The six portfolios sorted on size and book-to-market can be used to reconstruct HML.
• Consult the factor documentation and papers for precise construction details.

Tags

# Value factor from Ken French's library


# Value factor from Ken French's library












I'm after returns of the Value factor (book-to-market) from Ken French's library. Based on the description, I'm guessing it's this one: `Portfolios Formed on Book-to-Market`. The csv has the following headings:

- SMALL LoBM

- ME1 BM2

- SMALL HiBM

- BIG LoBM

- ME2 BM2

- BIG HiBM

I'm guessing Small/Big relates to the large/small market cap halves and Lo/Hi relates to low/high B/M. What does `ME1 BM2` and `ME2 BM2` mean? Is Value factor return calculated as `((BIG HiBM - BIG LoBM) + (SMALL HiBM - SMALL LoBM)) / 2`?

## Answer by Matthew Gunn (score 3, accepted)

https://quant.stackexchange.com/a/70057

If you just want the value factor, you want to download the "Fama-French 3 Factors" or "Fama-French 5 Factors" product. Those have the excess returns (i.e. return in excess of the risk free rate) for HML, their value factor. Their construction is described in the details page. For further details, read their papers.

As described in the links above, you can replicate their calculation of HML using portfolio returns of their six portfolios sorted on size and book to market. Reconstructing HML yourself may enhance understanding of what HML is and how it is constructed, but you can just download the HML time-series from the data library.

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.