Fama-French Portfolios and Factors
- Fama-French Portfolios and Factors
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- The Fama-French Portfolios are constructed from the intersections of two portfolios formed on size, as measured by market equity (ME), and three portfolios using the ratio of book equity to market equity (BE/ME) as a proxy for value. Returns from these portfolios are used to construct the Fama-French Factors. Eugene Fama and Kenneth French showed that their factors capture a statistically significant fraction of the variation in stock returns (see “Common Risk Factors in the Returns on Stocks and Bonds”, Journal of Financial Economics 33, 1993). The Fama-French data source is Kenneth French’s web site at Dartmouth.
The Pastor-Stambaugh Liquidity series includes ‘non-traded’ and ‘traded’ liquidity factors, with the latter series derived from dividing common stocks (in the CRSP monthly stocks file data) into 10 groups based on each stock’s sensitivity to the ‘non-traded’ liquidity innovation factor (as described in the paper).
The Sadka Liquidity measures are non-traded, market-wide, undiversifiable risk factors. Price impact is separated into permanent (variable) and transitory (fixed) price effects.
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- Related Subjects
- Accounting
- Business
- Finance
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- Related Types
- Company and Industry Information
- Statistics and Numeric Data
