Weekly Factor Returns

A look at what factors influenced the market last week

Equities were positive last week with each index gaining at least 1.5%. Small cap stocks had the best performance as the Russell 2000 gained 3.23%.

Factor returns were directionally similar across four of our five key factors. Several spreads exceeded normal expectations. Small cap factor spreads had the most extreme moves.

Volatility was a major driver of returns. The most volatile stocks outperformed the least volatile by 4.69% in the large cap index, 4.53% in the mid cap index, and 7.01% among small caps. The large and mid cap Volatility spreads were greater than one standard deviation and the small cap spread was greater than two standard deviations.

Value was negative in the small cap universe. The -4.54% Value spread in the Russell 2000 makes sense due to the strong inverse relationship with Volatility. The small cap Value spread was also greater than two standard deviations from average. Large and mid cap Value spreads were less meaningful.

Medium-term momentum (MTM) declined across the capitalization spectrum. Stocks that had outperformed the most over the previous six months underperformed last week. MTM experienced the largest reversal in the Russell 2000 (-3.04%).

Short-term momentum (STM) was positive in each index. Stocks that outperformed the most over the previous four weeks continued to outperform last week. STM was highest in the Russell MidCap (+0.99%).

Smaller companies tended to outperform larger companies within each index. Size was -1.91% in the Russell 1000 where the factor has a greater influence on the overall index relative to the mid and small cap factors.

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.