Weekly Factor Returns

A look at what factors influenced the market last week

Equity markets declined last week. The Russell 1000 fell 2.62% and the Russell 2000 fell 3.45%.

Factor returns were strongest within Medium-term momentum (MTM), Value, and Size.

MTM experienced the largest spreads in each index. Stocks that had outperformed the most over the previous six months continued to outperform last week. The highest MTM stocks outperformed the lowest MTM stocks by 4.61%, on average, in the large cap universe and by 3.63% among small caps. Both spreads were greater than one standard deviation above average.

Value was not in favor during the market decline. The most attractively valued stocks underperformed the least attractively valued by 1.78% in the Russell 1000 and by 3.53% in the Russell 2000. The large and small cap Value spreads were greater than one standard deviation below average.

Size was influential, particularly among large cap stocks where the factor has a bigger impact on the overall index relative to the small cap index. The largest ten percent of stocks outperformed the smallest ten percent by 2.51%, on average, in the large cap universe. The large cap Size spread was greater than one standard deviation above average. Size was +0.76% in the small cap universe.

Volatility was mixed between the two indices. Higher Volatility stocks outperformed in the Russell 2000. Volatility was negative in the Russell 1000.

Short-term momentum (STM) also had divergent returns. STM was positive (+1.12%) in the small cap universe. STM experienced a small reversal among large caps.

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.