Weekly Factor Returns

A look at what factors influenced the market last week

Equities were positive last week. The large cap Russell 1000 gained 2.06% while the small cap Russell 2000 gained 4.49%.

Market gains were driven by strong factor returns. The major theme was higher Volatility and weaker Value. Several factor spreads exceeded normal expectations.

Volatility was the biggest influence last week. Stocks with the most Volatility outperformed those with the least Volatility by +5.55% in the Russell 1000 and by +6.29% among small caps. Both spreads were above their normal ranges, with the small cap Volatility spread more than two standard deviations from its weekly average.

Attractive Value was not an influence. This was a reversal from the prior week. The most attractively valued stocks underperformed the most attractive stocks by -3.0% in the large cap space and by -3.33% in the small cap universe. Each negative Value spread was greater than one standard deviation below their respective averages.

Factor returns for both measures of Momentum were mixed between the two Russell indices. Medium-term (MTM) and Short-term (STM) momentum were positive in the small cap space. The biggest outperformers over the previous six months and four weeks continued their outperformance last week in the Russell 2000. Higher MTM and STM stocks reversed in the large cap universe.

Smaller stocks outperformed relative to larger capitalized stocks in the Russell 1000. Size was positive in the small cap index, although Size is less influential 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.