1
$\begingroup$

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?

Improve this question
$\endgroup$

1 Answer 1

Reset to default
2
$\begingroup$

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).

Improve this answer
$\endgroup$
13
  • $\begingroup$ I've see your point, but in terms of the finer details, $\endgroup$
    – user22485
    Oct 25, 2018 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, 2018 at 8:49
  • 1
    $\begingroup$ 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, 2018 at 8:57
  • $\begingroup$ Thats what I am after! Thanks very much for your help! $\endgroup$
    – user22485
    Oct 25, 2018 at 9:48
  • $\begingroup$ Would you happen to know how to handle missing data? $\endgroup$
    – user22485
    Oct 25, 2018 at 9:48

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge that you have read and understand our privacy policy and code of conduct.

Not the answer you're looking for? Browse other questions tagged or ask your own question.