Weekly Factor Returns

A look at what factors influenced the market last week

Equity markets were mixed last week. The large cap Russell 1000 rose 1.03% while the small cap Russell 2000 declined 1.02%.

Factor spreads were within expected ranges. There was divergence among key factors.

Value and Volatility experienced opposing returns, which is common due to their inverse relationship. The direction of returns differed between the two indices. In the large cap universe, Value declined and Volatility was positive. (+2.67%). In the small cap universe, Value was positive (+2.26%) and Volatility declined.

Size was positive in each index with the large cap spread up +0.88%. The Size factor is more influential in the large cap index due to the disproportionate effects of the largest stocks in the index.

Medium-term momentum (MTM) was a positive driver among small caps. Stocks that had outperformed the most over the previous six months continued to outperform last week. MTM was mildly positive in the Russell 1000.

Short-term momentum (STM) was positive in the large cap index. Recent winners continued their outperformance relative to recent losers.

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.