Kenneth French Library Returns Are Portfolio Returns, Not Log Returns

Summary

The document answers whether returns in Kenneth French’s data library are logarithmic. It states that the library’s returns are not log returns. Instead, Fama–French factors are built from portfolio returns, with the cited factor construction using value-weighted portfolios formed on size and book-to-market. The explanation connects the factor series to the returns of the underlying portfolios rather than to log transformations of those returns.

It also notes that industry portfolio data are available in monthly and yearly series, with equal-weighted and value-weighted versions. The practical lesson is to check each dataset’s description and download documentation before making assumptions about return conventions or weighting. The response does not specify every file’s exact format, compounding convention, or treatment of missing values, and it does not reproduce the full library documentation. Researchers should therefore consult the metadata for the particular series they use, especially when aligning return definitions across datasets or converting between simple and logarithmic returns.

Key ideas

• The described Kenneth French library series are simple portfolio returns, not log returns.
• Fama–French factors are constructed from portfolio returns, including value-weighted portfolios sorted on size and book-to-market.
• Industry portfolio datasets include monthly and yearly series with equal-weighted and value-weighted variants.
• Researchers should confirm return definitions and weighting in the documentation for the specific series they analyze.

Tags

# Are Kenneth French Research Returns log-Returns?


# Are Kenneth French Research Returns log-Returns?












Does anyone know if Kenneth French's return data on his website is log returns?

## Answer by skoestlmeier (score 2, accepted)

https://quant.stackexchange.com/a/42799

No, none of the returns on Kenneth French's data library are log-returns.

Any of the Fama/French research factors (i.e. SML, HML, etc.) is calculated as the mean of value-weighted portfolio returns. The description for the 3-factor calculation states:

> The Fama/French factors are constructed using the 6 value-weight portfolios formed on size and book-to-market.

,which holds for other factor-returns as well.

The returns of the industry-portfolios are given both as monthly and yearly return series, calculated as equal-weighted returns as well as value-weighted returns. This information can be obtained wether within the download file or its corresponding description page.

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.