Weekly Factor Returns

A look at what factors influenced the market last week

Equity markets were positive last week. The large cap Russell 1000 and Russell MidCap were each up about 1.4%. The small cap Russell 2000 gained 0.95%.

Four of the five key factors had directionally similar returns within each index. Medium-term momentum (MTM) experienced the strongest moves across the capitalization spectrum.

Stocks that outperformed the most over the previous six months continued to outperform last week, compared to those stocks that underperformed the most over the previous six months. MTM spreads were more than one standard deviation below their averages in each index.

Short-term momentum (STM) experienced divergent returns. STM was positive in the large and mid cap universe and negative among small caps.

Smaller stocks tended to outperform against larger stocks in each index. The Size factor was most negative in the Russell 2000 where the spread was two standard deviations below its average.

Higher Volatility was another key theme last week. The most volatile stocks outperformed the least volatile, on average, by 1.63%, 2.69%, and 1.89% across large, mid, and small caps, respectively.

Value was mildly positive in each index and was not a meaningful influence last week.

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.