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Weekly Factor Returns

A look at what factors influenced the market last week

Domestic equities declined last week. The Russell 1000 lost 3.04% and the Russell 2000 lost 2.76%.

Low Volatility and Value were the dominant themes. Several factor spreads were beyond normal expected ranges.

Value was a key influence on stock returns. Within the small cap universe, the most attractively valued stocks outperformed the least attractive decile by 4.99%, on average. The small cap Value spread was over two standard deviations above the weekly average. The +3.28% spread in the large cap index was greater than one standard deviation above average.

Lower Volatility stocks were in favor during the market’s decline last week. Stocks ranked highest on Volatility underperformed those with the least Volatility by 3.95% in the Russell 1000 and underperformed by 4.17% in the Russell 2000. Both spreads were greater than one standard deviation below their averages.

Momentum reversed at both the short- and medium-term lengths. Medium-term momentum (MTM) was the most negative in the Russell 1000. The MTM spread was -4.10% indicating that the stocks which had outperformed the most during the six months prior to last week underperformed last week.

Size was positive in each universe. The large cap Size spread of +0.61% was the only factor that did not have an absolute return of at least 1.00%.

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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