# How does Kenneth French create the industry portfolio returns?

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?

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).

• I've see your point, but in terms of the finer details, – user22485 Oct 25 '18 at 8:48
• 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. – user22485 Oct 25 '18 at 8:49
• 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. – skoestlmeier Oct 25 '18 at 8:57
• Thats what I am after! Thanks very much for your help! – user22485 Oct 25 '18 at 9:48
• Would you happen to know how to handle missing data? – user22485 Oct 25 '18 at 9:48