Can anyone guide me how to create value-weighted portfolios in asset pricing tests? I know about equally-weighted, for instance, after creating six portfolios of size-BE/ME, we have to place equal weights in each of the six portfolios.
I have read in literature that we have to place weights as per market capitalization for creating value-weighted portfolios, but my question is that how we do exactly do it? i have six portfolios of size-BE/ME so I have six returns for each portfolio, now how am I going to place value weights? It would be great if someone can provide a little demonstration.