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Kenneth Frenches Data Library includes industry portfolios.

Is this done via a software of some type.

I have some stock returns but I want to calculcated the returns of the industries in the Chinese market?

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The constitution of each industry portfolio is described in each "detail"-section on Kenneth French´s homepage. The industries are defined by sorting each NYSE, AMEX, and NASDAQ stock based on its four digit SIC-code.

The sort is applied at the end of June of year $t$. Monthly returns are calculated for the subsequent year, i.e. from July of year $t$ to end of June in year $t+1$. The portfolio return is the average value-weighted return of each stock, i.e. you weight each stock return with its market-valuation (number of shares outstanding times stock price). The procedure is clearly described in the below reference.


Reference

Fama/French (1997), Industry Cost of Equity, Journal of Financial Economics (43).

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  • $\begingroup$ I've see your point, but in terms of the finer details, $\endgroup$ – user22485 Oct 25 '18 at 8:48
  • $\begingroup$ So in June are the weights create and then not rebalanced until next june, Therefore, to give a simple example with two stocks, A and B, if we start in June with 50% in each and the return in July is 30% for stock A and 0% for stock B, the weights will actually be 56.5% for stock A and 43.5% for Stock B. The portfolios are only rebalanced each June. $\endgroup$ – user22485 Oct 25 '18 at 8:49
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    $\begingroup$ What you describe is an equal-weighted portfolio return. You have to multiply the return of july (e.g. 30% for stock $A$) with the equivalent market-valuation at the end of june (number of shares outstanding times stock price of $A$ at the end of june) and divide both by the total market capitalization of all stocks within this portfolio. This results in a value-weighted portfolio return where each stock weight keeps track with price changes. $\endgroup$ – skoestlmeier Oct 25 '18 at 8:57
  • $\begingroup$ Thats what I am after! Thanks very much for your help! $\endgroup$ – user22485 Oct 25 '18 at 9:48
  • $\begingroup$ Would you happen to know how to handle missing data? $\endgroup$ – user22485 Oct 25 '18 at 9:48

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