Weekly Factor Returns

A look at what factors influenced the market last week

Equities were negative for the second consecutive week. The Russell 1000 declined 0.23% while the Russell 2000 declined 0.33%

Underneath the minimal market moves, there were strong factor moves, particularly in the large cap universe. Several factor spreads exceeded normal expectations.

The large cap environment was influenced by Medium-term momentum (MTM), Size, and Value (or the lack thereof). Negative Value was also a component in small cap returns.

Stocks with the most attractive Value rankings underperformed, on average, those stocks with the weakest Value rankings in each index. The Value spread was -2.46% in the Russell 1000 and -2.63% in the Russell 2000. Both returns were greater than one standard deviation below their weekly averages.

The best returners over the six months prior to last week continued to outperform last week. MTM was +2.98% in the large cap universe. This was one standard deviation above average. MTM was +0.84% in the small cap space.

Size (Capitalization) was another key factor in the Russell 1000. The largest ten percent of stocks outperformed the smallest decile by 2.22%, on average. The large cap Size spread was also greater than one standard deviation above average. Size was negative in the Russell 2000.

Volatility was mixed between the indices. Higher Volatility stocks were favored relative to lower Volatility stocks in the small cap index.

Short-term momentum (STM) was slightly positive in each index.

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.