Weekly Factor Returns

A look at what factors influenced the market last week

Equities rose sharply last week. The large cap Russell 1000 gained 4.65% and the small cap Russell 2000 gained 4.10%.

Factor returns were directionally similar across the capitalization spectrum. Four small cap spreads and three large cap spreads exceeded normal ranges.

High Volatility stocks helped drive the markets higher. The most volatile stocks outperformed the least volatile by 8.19% in the large cap universe and by 5.10% among small caps. The large cap Volatility spread was 2.5 standard deviations above the weekly average. The small cap Volatility exceeded one standard deviation.

Short-term (STM) momentum experienced a strong reversal last week. Stocks that had outperformed the most over the previous four weeks underperformed last week. The STM spread was -4.52% in the Russell 1000 and -5.51% in the Russell 2000. The small cap STM return was greater than two standard deviations below average. The large cap STM return was just under two standard deviations below average.

Smaller companies tended to outperform in each index. Size had a greater return in the small cap universe, although the Size factor is less influential to the overall index compared to the large cap Size factor. The -4.60% small cap Size spread was greater than two standard deviations below average.

Value was out of favor last week as companies with more favorable valuations tended to underperform. The most attractively valued stocks underperformed the least attractively valued by 1.70% in the large cap universe and by 4.29% among small caps. The small cap Value spread was two standard deviations below average. The large cap Value spread was one standard deviation below average.

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.