Weekly Factor Returns

A look at what factors influenced the market last week

Equity markets were mixed last week. The large cap Russell 1000 declined 1.21% while the small cap Russell 2000 had a small gain (+0.11%).

Factor returns were mostly incongruent – either directionally divergent or unequal in terms of magnitude. All factor returns were within normal expectations.

Size was the lone factor with similar returns between the two indices. Negative returns to Size indicate smaller companies were favored relative to larger capitalized companies in each index.

Short-term momentum (STM) experienced the biggest difference in returns. STM was positive in the Russell 1000 (+1.0%) and negative in the Russell 2000 (-1.43%). Stocks that outperformed over the previous month continued to outperform in the large cap index. Previous outperformers experienced a reversal in the small cap space.

Value spreads were also divergent. Value was a positive influence in the Russell 1000. The most attractively valued stocks underperformed the least attractively valued by 0.75% in the Russell 2000.

Volatility was positive, particularly among small caps. The most volatile stocks outperformed the least volatile by 0.94% in the small cap universe.

Medium-term momentum (MTM) experienced a strong reversal in the small cap index. MTM declined 1.76% in the Russell 2000. The MTM spread was -0.34% in the Russell 1000.

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.