Fama-French factors
Description of Fama/French Benchmark Factors (from http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/Data_Library/f-f_bench_factor.html)
The Fama/French benchmark factors, Rm-Rf, SMB, and HML, are constructed
from six size/book-to-market benchmark portfolios that do not include
hold ranges and do not incur transaction costs.
Rm-Rf, the excess return on the market, is the value-weighted return
on all NYSE, AMEX, and NASDAQ stocks (from CRSP) minus the one-month
Treasury bill rate (from Ibbotson Associates).
SMB (Small Minus Big) is the average return on three small portfolios
minus the average return on three big portfolios,
SMB = 1/3 (Small Value + Small Neutral + Small Growth)
- 1/3 (Big Value + Big Neutral + Big Growth).
HML (High Minus Low) is the average return on two value portfolios minus
the average return on two growth portfolios,
HML = 1/2 (Small Value + Big Value)
- 1/2 (Small Growth + Big Growth).
See Fama/French, 1993, “Common Risk Factors in the Returns on
Stocks and Bonds,” Journal of Financial Economics, for a complete
description of the factor returns.
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