Weekly Factor Returns

A look at what factors influenced the market last week

Domestic equities were positive last week. The large cap Russell 1000 had the largest gain, with a 3.42% advance. The small cap Russell 2000 gained 3.01%, and the Russell MidCap gained 2.22%.

Factor returns were directionally similar across each index within Volatility and Medium-term momentum (MTM). Two small cap spreads exceeded normal expectations.

Higher Volatility was a driver of index returns within each index. Stocks exhibiting the most Volatility outperformed those with the least Volatility, on average.

MTM was the only other key factor where spreads were similar, although MTM was less influential to the broader index returns. MTM was slightly negative.

Short-term momentum (STM) was positive in the large and mid cap indices. STM experienced a reversal in the small cap index (-2.86%). The stocks that had outperformed the most during the prior four weeks underperformed last week in the Russell 2000. The negative small cap STM spread was greater than one standard deviation below its average.

Size had a similar return profile to STM. The largest ten percent of stocks outperformed the smallest ten percent within the Russell 1000 and Russel MidCap indices. Smaller stocks tended to outperform in the Russell 2000. The negative Size spread in the small cap universe was greater than one standard deviation below its average.

Value was not a strong driver of returns last week. The most attractively valued stocks underperformed the least attractively valued in the large and small indices. Value was negligible in the mid cap 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.