Weekly Factor Returns

A look at what factors influenced the market last week

Equities rose during the holiday-shortened week. Small cap stocks gained the most, followed by mid caps. Large cap stocks had the smallest gain.

Factor spreads were directionally similar across Medium-term momentum (MTM), Size, and Volatility. Several returns exceeded normal expectations.

Index gains were driven by a MTM reversal. Stocks that had outperformed the most over the previous six months underperformed last week. The large and mid cap MTM spreads were each greater than one standard deviation below their averages. The small cap MTM spread (-5.83%) was greater than two standard deviations below its average.

Smaller stocks fared better than larger stocks within each index. The largest stocks outperformed the smallest stocks by 2.91%, on average, in the Russell 1000. The Size factor has a greater impact in the Russell 1000 than it does in the mid and small indices. Each Size spread was greater than one standard deviation below its average.

Volatility was higher during the short week. Stocks exhibiting the most price Volatility outperformed those with the least, on average, by over 2.0% in all three indices.

Value was positive in the large and mid cap indices, but slightly negative in the small cap universe. The most attractively valued stocks outperformed the least attractively valued by about 2.5% in the Russell 1000 and Russell MidCap indices. Each positive spread was greater than one standard deviation above average. The negative small cap Value spread was within normal ranges.

Short-term momentum (STM) was 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.