FF6.monthly | R Documentation |
FF6.monthly
is the Fama-French six-factor monthly data series on U.S. stock
market from 1963-07 to 2020-04. The data set also includes the risk-free rate
on 1-month U.S. T-Bill during the same period.
data("FF6.monthly")
An xts
object containing observations of Fama-French Factors on U.S. Stock
Market.
Frequency: Monthly.
Date Range: 1963-07 to 2020-04.
Data updated: 2020-08-19 22:32:59 CEST.
RF: A numeric. The risk-free rate on 1-month U.S. T-Bill. See 'RF variable' section below.
MKT.RF: A numeric. The market portfolio proxy return net of risk-free rate factor. See 'MKT.RF factor' section below.
SMB: A numeric. The "Small Minus Big" factor. See 'SMB factor' section below.
HML: A numeric. The "High Minus Low" factor. See 'HML factor' section below.
RMW: A numeric. The "Robust Minus Weak" factor. See 'RMW factor' section below.
CMA: A numeric. The "Conservative Minus Aggressive" factor. See 'CMA factor' section below.
MOM: A numeric. The "Momentum" (or Up Minus Down, UMD) factor. See 'MOM factor' section below.
The object consists of 682 rows and 7 columns.
In addition to column definitions, this section contains a glimpse into factors construction and their underlying variables.
The Fama-French factors are constructed using the six value-weight portfolios formed on size, the six value-weight portfolios formed on size and operating profitability, and the six value-weight portfolios formed on size and investment.
Market equity, also referred to as size and denoted ME
, is a firms'
financial variable calculated as the product of price times shares outstanding.
The stock price is from CRSP, whereas shares outstanding are from Compustat
(if available) or CRSP.
Book equity, denoted BE
, is a firms' financial variable that Fama-French
construct from Compustat data or is collected from the Moody's Industrial, Financial, and Utilities manuals.
BE
is the book value of stockholders' equity, plus balance sheet deferred
taxes and investment tax credit (if available), minus the book value of preferred
stock. Depending on availability, they use the redemption, liquidation, or par
value (in that order) to estimate the book value of preferred stock.
Stockholders' equity could be reported by Moody's or Compustat, otherwise the
authors measure stockholders' equity as the book value of common equity plus
the par value of preferred stock, or the book value of assets minus total
liabilities (in that order).
The book-to-market ratio of a firm is defined as the ratio between its market equity and book equity:
BM = BE/ME
The portfolios, which are constructed at the end of each June, are the intersections
of 2 portfolios formed on size (ME
) and 3 portfolios formed on the BM
.
The size breakpoints for year t
is the median NYSE market equity at the
end of June of year t
(see K. R. French's Detail for ME Breakpoints).
The BM
for June of year t
is the book equity for the last fiscal
year end in t-1
divided by ME
for December of t-1
.
The BM breakpoints are the 30th and 70th NYSE percentiles (see K. R. French's Detail for BM Breakpoints).
The operating profitability ratio (OP) used to form portfolios in June of year
t
is annual revenues minus cost of goods sold, interest expense, and selling,
general, and administrative expense divided by the sum of book equity and minority
interest for the last fiscal year ending in t-1
.
The portfolios, which are constructed at the end of each June, are the intersections
of 2 portfolios formed on size (market equity, ME) and 3 portfolios formed on
profitability (OP
).
The size breakpoint for year t
is the median NYSE market equity at the
end of June of year t
(see K. R. French's Detail for ME Breakpoints).
OP
for June of year t
is annual revenues minus cost of goods sold,
interest expense, and selling, general, and administrative expenses divided by
book equity for the last fiscal year end in t-1
.
The OP breakpoints are the 30th and 70th NYSE percentiles (see K. R. French's Detail for Operating Profitability Breakpoints).
The investment ratio used to form portfolios in June of year t
is the
change in total assets from the fiscal year ending in year t-2
to the fiscal
year ending in t-1
, divided by t-2
total assets.
These portfolios are constructed at the end of each June and represent the intersections
of 2 portfolios formed on market equity, denoted ME
, and 3 portfolios formed
on investment (INV
).
The size breakpoint for year t
is the median NYSE market equity at the end
of June of year t
(see K. R. French's Detail for ME Breakpoints).
Investment is the change in total assets from the fiscal year ending in year t-2
to the fiscal year ending in t-1
, divided by t-2
total assets.
The investment ratio breakpoints are the 30th and 70th NYSE percentiles (see K. R. French's Detail for Investment Breakpoints).
The RF
variable refers to the risk-free rate. It depends on the period been
considered and on the country. For example, for U.S. monthly data series is the
one month T-Bill return.
The RF
data series distributed by K. R. French with the Fama-French factors
data are usually obtained from Ibbotson Associates Inc. (Morningstar).
With MKT.RF
we indicate the excess return on the market portfolio return proxy,
net of the risk-free rate RF
calculated on the same period t
, that is
MKT.RF = MKT - RF
or, as it is also commonly denoted in the literature,
MKT.RF = R_{m} - R_{f}
MKT
is obtained by Fama-French as the value-weight return of all CRSP
firms that are incorporated in the U.S. and listed on the NYSE, AMEX, or NASDAQ
securities markets. These firms must have a CRSP share code of 10 or 11, good
shares and price data, at the beginning of the period.
The SMB
(Small Minus Big) factor return variable is the average return on
three (nine) small portfolios minus the average return on three (nine) big portfolios.
Where the number (three or nine) and type (small or big) of portfolios in factors
construction depends on whether the model being considered is the Fama-French's Three-factor model
or the Fama-French's Five-factor model, respectively.
In formulas, for the Three-factor model we express the SMB factor as
SMB = \frac{1}{3}[(Small Value + Small Neutral + Small Growth) - (Big Value + Big Neutral + Big Growth)]
For the Five-factor model the process is analogous, except that in this case an SMB factor has to be built for each one of the three sets of portfolios based on specific firms' financial fundamentals. Once that is accomplished, their weighted average is taken. We thus obtain
SMB = \frac{1}{3}[SMB_{(B/M)} + SMB_{(OP)} + SMB_{(INV)}]
The HML
(High Minus Low) factor return variable is the average return on
the two value portfolios minus the average return on the two growth portfolios.
That is,
HML = \frac{1}{2}[(Small Value + Big Value) - (Small Growth + Big Growth)]
The RMW
(Robust Minus Weak) is the average return on the two robust operating
profitability portfolios minus the average return on the two weak operating
profitability portfolios,
RMW = \frac{1}{2}[(Small Robust + Big Robust) - (Small Weak + Big Weak)]
K. R. French's Detail for Operating Profitability Breakpoints
The CMA
(Conservative Minus Aggressive) is the average return on the two
conservative investment portfolios minus the average return on the two aggressive
investment portfolios,
CMA = \frac{1}{2}[(Small Conservative + Big Conservative) - (Small Aggressive + Big Aggressive)]
K. R. French's Detail for Investment Breakpoints
The MOM
(Momentum) factor return variable is the average return on the two
high prior return portfolios minus the average return on the two low prior return
portfolios, that is
MOM = \frac{1}{2}[(Small High + Big High) - (Small Low + Big Low)]
To construct the MOM
factor, Fama-French use six value-weight portfolios
formed on size and prior (2-12) returns. The portfolios are formed monthly.
For the U.S., the monthly size breakpoint is the median NYSE market equity while the monthly prior (2-12) return breakpoints are the 30th and 70th NYSE percentiles. Stocks included are those traded on NYSE, AMEX, and NASDAQ, for which prior return data is available.
In the Fama-Franch factors data series missing data are indicated by -99.0
,
-99.99
or -999
. Which value is actually used really depends by the
context and the data set at hand, we recommend looking any of those values with
suspicion, especially for real-world business use cases when even one basis point
count.
Most of the Fama-French factor data series are constructed from data provided by CRSP/Compustat. Remarkably, these include all data regarding stock prices and firms' fundamentals. In particular, see Changes in CRSP Data, where Prof. K. R. French explains which data changes from the database have affected the data series constructed and used in their research.
There are many other providers involved, examples are Bloomberg, Ibbotson Associates Inc., Morgan Stanley Capital International, Moody's. They are mentioned at the occurence.
All the data series downloaded from Prof. Kenneth R. French's online data library at https://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html are under the most recent (c) Kenneth R. French.
Kenneth R. French's data library K. R. French's Variables Definitions
Fama, Eugene F and French, Kenneth R (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics. Fama, Eugene F and French, Kenneth R (2015). A five-factor asset pricing model. Journal of Financial Economics.
Davis, Fama, and French (2000). Characteristics, Covariances, and Average Returns: 1929-1997. Journal of Finance.
Fama, E. F. and French, K. R. (2018). Choosing factors. Journal of Financial Economics.
The series was generated with GetFactors()
.
data(FF6.monthly)
head(FF6.monthly)
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