Skip to content
All library documents

Why Industry Portfolio Returns Do Not Provide Actual Prices

Article Quant Q&A · Author: Tony Chivers
Read the original

Summary

The document addresses whether industry portfolio returns from Kenneth French's data library can be converted into historical prices. Its answer is that the portfolios are collections of stocks and do not have a single underlying traded price series. Returns alone also do not specify an original price level, so they cannot recover an absolute price history.

A practical alternative is to choose a date, assign the portfolio an arbitrary normalized starting value, and compound the reported returns forward to create a synthetic value series. That series represents accumulated performance from the chosen base, rather than an observed market price. The response questions the usefulness of producing such a price for these portfolios. It does not provide a worked calculation or discuss details such as return frequency, distributions, or how to align the compounded series with a trading application.

Key ideas

  • Industry portfolios are baskets of stocks rather than individual securities with a single market price.
  • Returns without a starting value cannot determine an absolute price history.
  • A normalized starting value can be chosen to compound returns into a synthetic performance series.
  • The resulting series is an index-like representation, not an observed portfolio price.

Tags

EquitiesFactor investingStatistics
Full text
# Kenneth Frenches Data library return data to price data?


# Kenneth Frenches Data library return data to price data?












I have downloaded the industry portfolios from Kenneth Frenches data library, I am wondering if anyone knows where I can find the price data?

Can I convert it even if I don't have a starting value?

http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html

## Answer by phdstudent (score 1, accepted)

https://quant.stackexchange.com/a/41811

No you cannot. Those are portfolios of stocks there is no price associated. The best you can do is to pick a date take a normalization value of 100 as the price of each portfolio and use returns to compound the price. I actually see no usefulness in getting the price of such portfolios.

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.