Q5.monthly: Hou-Xue-Zhang q-factor Five-Factors Data Set

Description Usage Format Details Q-Factors construction RF variable BE variable Market Equity Variable Investment-to-assets variable Return on Equity variable MKT.RF factor ME factor IA factor ROE factor EG factor Source References See Also Examples


Q5.monthly is the Hou-Mo-Xue-Zhang (2020) q-factor five-factors monthly data series on U.S. stock market from 1967-01 to 2019-12. The data set also includes the risk-free rate on 1-month U.S. T-Bill during the same period.




An xts object containing observations of Hou-Mo-Xue-Zhang q-factor five-factors data set on U.S. Stock Market, and the risk-free rate on 1-month U.S. T-Bill.

The object consists of 636 rows and 6 columns.


In addition to column definitions, this section contains a glimpse into factors construction and their underlying variables.

Q-Factors construction

Authors construct their size, investment, and Roe factors from independent, triple 2x3x3 portfolio sorts on size, investment-to-assets (I/A), and Roe.

Taking the intersection of the two size, three I/A, and three Roe groups, they form eighteen portfolios. Monthly value-weighted portfolio returns are calculated for the current month, and the portfolios are rebalanced monthly.

RF variable

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).

BE variable

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).

Market Equity Variable

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.

Investment-to-assets variable

Investment-to-assets (I/A) is the annual change in total assets divided by one-year-lagged total assets.

Return on Equity variable

The return on equity ratio (ROE) authors consider is the income before extraordinary items divided by book equity (BE) lagged by a quarter.

MKT.RF factor

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


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.

ME factor

The size factor (ME) is the small-minus-big monthly difference between the arithmetic average of the returns on 9 small size portfolios and the arithmetic average of the returns on 9 big size portfolios.

IA factor

The investment factor (IA) is the low-minus-high monthly difference, between the arithmetic average of the returns on 6 low I/A portfolios and the arithmetic average of the returns on 6 high I/A portfolios.

ROE factor

The ROE factor is the high- minus-low monthly difference between the arithmetic average of the returns on 6 high ROE portfolios and the arithmetic average of the returns on the 6 low ROE portfolios.

EG factor

The expected growth (EG) factor is constructed from independent 2x3 sorts on size and the expected one-year-ahead investment-to-assets change, E_{t}[d I/A]. In turn, E_{t}[d I/A] is formed using Tobin's q, operating cash flow-to-assets, and the change in ROE (measured as the year on year difference in ROE).


global-q.org, Technical Document: Factors


Davis, Fama, and French (2000). Characteristics, Covariances, and Average Returns: 1929-1997. Journal of Finance.

Hou, K. and Mo, H. and Xue, C. and Zhang, L. (2019). Which factors?. Review of Finance.

Hou, K. and Mo, H. and Xue, C. and Zhang, L. (2020). An augmented q-factor model with expected growth. Review of Finance.

See Also

The series was generated with GetFactors().



JustinMShea/ExpectedReturns documentation built on Sept. 27, 2020, 5:41 p.m.