Estimating Fama-French HML factor in real-time

A frequently asked question on my asset allocation whitepaper using the HML factor, is how to calculate HML in real time.  This can be accomplished by estimating with ETF returns (for example, Vanguard):

HML = 1/2 (Small Value + Big Value) – 1/2 (Small Growth + Big Growth).

= 1/2 (VBR + VTV – VBK – VUG)

Using Yahoo finance data gives the following results:

HMLcorr

The trend line is at 45 degrees but scatter is significant.  I still need to recalculate the findings from the paper with estimated HML.  Of course, with a full database of stocks, actual HML could be calculated in real time but this is probably outside the resources of an individual investor.

The last 4 years looks like this:

HMLtime

Value outperformance over momentum is accelerating.

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3 thoughts on “Estimating Fama-French HML factor in real-time

  1. Pingback: The Whole Street’s Daily Wrap for 9/10/2014 | The Whole Street

    • Thanks for the suggestion. I get a monthly correlation of 0.65 between RALS and HML. I’ll also take a look at CHEP and write up on the blog.

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