Weekly Factor Returns

A look at what factors influenced the market last week

Domestic equities were positive for the second consecutive week. The large cap Russell 1000 gained 2.98% and the small cap Russell 2000 gained 3.24%.

Factor returns were directionally similar across each index. There was one factor in each index that exceeded normal expectations.

Short-term momentum (STM) experienced a reversal, particularly in the Russell 2000. Stocks that had outperformed the most over the preceding four weeks underperformed last week. The spread between stocks with the highest STM ranks and the lowest was -3.91% in the small cap universe. This was over one standard deviation below average. STM was -1.26% in the large cap universe.

Value was down last week. Stocks with the most attractive valuations tended to underperform those with the least attractive valuations. The Value spread was -1.74% in the large cap index and -1.44% among small caps. The negative large cap Value spread was one standard deviation below average.

Volatility was higher. Stocks with higher Volatility were in favor relative to less volatile stocks. The most volatile stocks outperformed the least volatile by 2.33%, on average, in the Russell 1000 and by 1.73% in the small cap index.

Size was negligible in each index and not a meaningful driver of returns.

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.