As the title already reveals: I need to know whether the Fama-French (carhart) factors are constructed by using equal-weight sorting or value-weight sorting.

On Kenneth F. website it says the portfolios are are constructed using the 6 value-weight portfolios formed on size and book-to-market.

However Cremers et al. (2012) argue in their paper, that FF use equal-weighted sorts?

This is relevant as it may reveal that the alpha that shows up from a regression upon the FF factors is due to equal-weighting rather than actual 'skill' alpha.


1 Answer 1


Regards FFC, you refer to four portfolios, which are formed by using different weightings:

  1. The market portfolio, which is a value-weighted return with end-of-previous market cap. as weights:

    The excess return on the market, value-weight return of all CRSP firms incorporated in the US and listed on the NYSE, AMEX, or NASDAQ that have a CRSP share code of 10 or 11 at the beginning of month t, good shares and price data at the beginning of t, and good return data for t minus the one-month Treasury bill rate (from Ibbotson Associates).

  2. The SMB portfolio, which is the equal-weighted return of value-weighted portfolios, i.e. the six sub-portfolio returns are value-based, and the hedge-portfolio is based on equal-weighted returns of these sub-portfolios:

    SMB (Small Minus Big) is the average return on the three small portfolios minus the average return on the three big portfolios.

  3. The HML portfolio, which is (as SMB) the equal-weighted return of value-weighted portfolios. Here, the return of four sub-portfolios are value-based, and the final HML return is the equal-weighted difference return of these sub-portfolio returns:

    HML (High Minus Low) is the average return on the two value portfolios minus the average return on the two growth portfolios.

  4. The WML (or MOM) portfolio, which is updated each month, and similar the HML is the equal-weighted return of four value-weighted sub-portfolios (see Jegadeesh/Titman (1993)).

    MOM is the average return on the two high prior return portfolios minus the average return on the two low prior return portfolios.


Carhart (1997). On Persistence in Mutual Fund Performance, The Journal of Finance.

Fama/French (1993), Common Risk Factors in the Returns on Stocks and Bonds, Journal of Financial Economics.

French (2019), Data Library.

Jegadeesh/Titman (1993), Returns to buying winners and selling losers: Implications for stock market efficiency, The Journal of Finance.

  • 1
    $\begingroup$ Many thanks for the quick and comprehensive clearification! I have indeed looked over the fact that equal-weight portfolio is simly the the average return of the value-weighted sub-portfolios! $\endgroup$
    – incognito
    Commented Sep 30, 2019 at 11:59

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