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Weekly Factor Returns

A look at what factors influenced the market last week

The Russell 1000 and Russell 2000 indices had diverging returns for the second straight week. This time the large cap index was positive (+1.55%) and the small cap index was negative (-.077%).

Factor returns were directionally similar between the two indices. Stocks with lower Volatility and attractive sector-relative valuations had an influence on the overall market last week.

Volatility spreads were negative, meaning the highest ten percent of stocks ranked by Volatility underperformed the lowest ranked ten percent, on average. Both spreads were greater than one standard deviation below their averages.

Value spreads were consistent across the capitalization ranges, with each rising over 2.5%. The returns to Value were above their normal expected ranges.

Medium-term momentum (MTM) was positive. This factor was particularly influential in the small cap universe. The highest rated MTM stocks outperformed the lowest MTM stocks by 3.74% among small caps.

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.



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