Weekly Factor Returns

A look at what factors influenced the market last week

Equity markets were lower last week. The small cap Russell 2000 led the decline with a -0.62% return. The Russell MidCap lost 0.54% and the large cap Russell 1000 declined 0.36%.

One factor had returns outside of normal expectations within two indices.

Both measures of momentum had sizeable moves last week. Medium-term momentum (MTM) experienced a reversal with negative spreads across each index. Stocks that had outperformed the most over the past six months tended to underperform last week. MTM had the largest decline within the mid cap universe.

Short-term momentum (STM) rose sharply in the large and mid cap indices. STM was +3.06% in the Russell 1000 and +3.46% in the Rusell MidCap. Both spreads were greater than one standard deviation above their averages. STM was not as influential in the small cap space.

Value was the only other factor with directionally similar returns across each index. The most attractively valued stocks underperformed relative to the least attractively valued, on average.

Volatility rose within the Russell 1000 and Russell MidCap indices. Volatility was less meaningful in the small cap universe.

Size spreads were also mixed. The largest stocks in the small cap Russell 2000 outperformed the smallest stocks, on average. The opposite was true in the mid cap universe. Size was negligible in the Russell 1000.

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.