Weekly Factor Returns

A look at what factors influenced the market last week

Equity markets were mixed for the third consecutive week. The large cap Russell 1000 gained 0.37% while the small cap Russell 2000 declined 1.47%. Spreads were greater among small caps where three of our five key factors had returns equal to or greater than one standard deviation.

Volatility was negative. Stocks with the highest Volatility underperformed the least volatile. Equity investors sought out the relative safety of lower Volatility stocks.

Within the small cap universe, Size was the biggest mover in terms of both absolute return and relative to its own history. The largest stocks in the Russell 2000 beat the smallest stocks by 3.81%, on average. This was a 1.8 standard deviation event.

The most attractively valued small cap stocks outperformed the least attractively valued by 2.35%. Value was positive in the Russell 1000 but to a lesser degree.

Short-term momentum (STM) returns indicate that last week’s outperforming stocks were also those that had outperformed the most over the prior four weeks. Medium-term momentum (MTM) was not meaningful among small caps and negative in the large cap universe.

In this series, we highlight several factors’ returns along with the broad index. These are factors – or stock characteristics – we monitor closely. Factor returns equal the difference in the average return of the highest ranked 10% (decile 1) of stocks minus the lowest ranked 10% (decile 10) within each metric. Returns are based on stocks that pass our screen for liquidity, price, and analyst coverage; therefore, some index constitutes are excluded (except for index return). Ranks are sector neutral and equal weight. Stocks are ranked one week before the return period date, with returns calculated for the following week.

Read factor explanations here.