Weekly Factor Returns

A look at what factors influenced the market last week

Equity markets declined for the second straight week. The Russell 1000 fell 2.59% while the Russell 2000 fell 2.60%. Factor spreads were also directionally similar across the capitalization spectrum.

A noticeable trend in factor returns was the large momentum moves in the small cap space. Both Medium-term (MTM) and Short-term momentum (STM) experienced positive spreads. This indicates that outperforming stocks last week had also outperformed over the previous six months and prior four weeks. The STM spread in our small cap universe was 3.24%. That was a 1.4 standard deviation move.

Volatility declined. Investors sought out lower Volatility stocks as the overall market declined. Lower Volatility stocks outperformed higher Volatility stocks by over 2.0% in each index.

Larger capitalized and more attractively Valued stocks were in favor relative to stocks with the opposite characteristics.

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.