2x3 Size and Value Portfolios
Size and Value portfolios are reconstituted annually at the end of June. All listed stocks in the specified universe are partitioned into 2 size portfolios (Small and Big) and 3 value portfolios (Value, Neutral, and Growth), ranked by Market Value (ME) and Book-to-Market Value ratio (BE/ME). The six portfolios are the intersections of the size and the value portfolios. Constituents of each of the six portfolios (Small Value, Small Neutral, Small Growth, Big Value, Big Neutral, and Big Growth) are weighted by their Market Value.
Companies without ordinary book value (missing or negative), with missing return or market capitalization data, or has not reported financial information for the second year are excluded from that reconstitution.
ME is the market capitalization at the time of reconstitution. BE/ME for June of year T is defined as the book value of common equity for fiscal year that ends in year T-1, divided by the market value at the end of year T-1.
The top 20 percentile of companies ranked by ME are partitioned into Big, the bottom 80 percentile of companies ranked by ME are partitioned into Small; The top 30 percentile of companies ranked by BE/ME are partitioned into Value, the bottom 30 percentile of companies ranked by BE/ME are partitioned into Growth, the middle 40 percentile of companies ranked by BE/ME are partitioned into Neutral.
2x3 Size and Momentum Portfolios
Size and Momentum portfolios are reconstituted monthly. All listed listed stocks in the specified universe are partitioned into 2 size portfolios (Small and Big) and 3 momentum portfolios (Up, Medium or Down companies), ranked by Market Value (ME) and 1-year momentum (PR1YR). Constituents of each of the size portfolios (Small Up, Small Medium, Small Down, Big Up, Big Medium, Big Down) are weighted by their Market Value.
Companies with missing return or market capitalization data for the 13 months prior to the reconstitution are excluded from that reconstitution.
ME is the market capitalization at the time of reconstitution. PR1YR is defined as cumulative total return for the last one year excluding the last month.
The top 20 percentile of companies ranked by ME are partitioned into Big, the bottom 80 percentile of companies ranked by ME are partitioned into Small; The top 30 percentile of companies ranked by PR1YR are partitioned into Up, the bottom 30 percentile of companies ranked by PR1YR are partitioned into Down, the middle 40 percentile of companies ranked by PR1YR are partitioned into Medium.
Market, Size, Value, Momentum Factor Returns
The Market Factor (Mkt-RF) is the total return of a market portfolio, in excess of the risk-free rate. The market portfolio is the Market Value weighted portfolio of all listed stocks in the specified universe.
The Size Factor (SMB) is defined as the average of total returns of the three Small portfolios, minus the average of the total returns of the three Big portfolios.
The Value Factor (HML) is defined as the average of the total returns of the Big and Small Value portfolios, minus the average of the total returns of the Big and Small Growth portfolios.
The Momentum Factor (Mom) is defined as the average of the total returns of the Big and Small Up portfolios, minus the average of the total returns of the Big and Small Down portfolios.
