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Weekly Factor Returns

A look at what factors influenced the market last week

Stocks were positive for the second consecutive week. Small caps led over large caps with the Russell 2000 gaining 1.71% and the Russell 1000 gaining 0.57%.

Larger companies, low Value, and higher Volatility were the key themes underlying market returns last week. Volatility was the only factor with similar spreads across each index. Value and Size in the small cap universe breached their normal expected ranges.

Volatility returned over 2.5% in each universe. Stocks with higher Volatility were in demand relative to stocks that exhibited lower Volatility.

Value was negative in each index, particularly in the small cap universe. The small cap Value spread was -4.84%. Stocks with the most attractive Value rankings underperformed those with the least attractive rankings by almost 5.0%. The negative small cap Value spread was 2.5 times below the weekly average.

Larger stocks performed better than smaller capitalized stocks, on average. The small cap Size spread was greater than one standard deviation below its weekly average.

Both measures of Momentum were divergent among the indices and less influential. There was a Short-term momentum (STM) reversal in the large cap index (-1.76%) and a positive STM spread in the Russell 2000.

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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