Weekly Factor Returns

A look at what factors influenced the market last week

Equity market returns were dissimilar and muted last week. The small cap Russell 2000 generated a small gain (+0.22%) while the large cap Russell 1000 (-0.03%) and the Russell MidCap (-0.13%) posted small losses.

Factor returns were mostly linear across the capitalization spectrum, with the largest spreads in the small cap universe, followed by mid cap spreads, and the smallest among large caps. Medium-term momentum (MTM) was the lone factor that did not follow that exact pattern. All factor returns were positive and  within normal ranges.

Volatility experienced the largest absolute spreads in each index. The most volatile stocks outperformed the least volatile by 2.07% in the Russell 2000.

Value was a positive influence last week. Stocks with the most attractive valuations outperformed those with the least attractive valuations. Spread were within the 0.5% to 1.0% range.

Larger stocks were favored relative to smaller capitalized companies. Size experienced the widest ranges between each spread. The large cap Size spread was the smallest of the three where the factor has a larger influence on the overall index compared to the mid and small cap Size factors.

Short-term momentum (STM) was strong in each index. Stocks that had outperformed the most over the previous four weeks continued to outperform last week. STM was the lone factor where the mid cap spread was less than the large cap spread.

Medium-term momentum also rose, but was less impactful than STM.

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.

The Russell 1000 Index is a U.S. stock market index that tracks the highest-ranking 1,000 stocks in the Russell 3000 Index, which represent about 93% of the total market capitalization of that index. 

The Russell Midcap Index is a stock market index that measures performance of the 800 smallest companies in the Russell 1000 Index. 

The Russell 2500 Index measures the performance of the 2,500 smallest companies in the Russell 3000 Index, with a weighted average market capitalization of approximately $4.3 billion, median capitalization of $1.2 billion and market capitalization of the largest company of $18.7 billion.

The Russell 2000 Index is a small-cap U.S. stock market index that makes up the smallest 2,000 stocks in the Russell Index. It was started by the Frank Russell Company in 1984. The index is maintained by FTSE Russell, a subsidiary of the London Stock Exchange Group. 

Index performance is presented as a benchmark for reference only and does not imply any portfolio will achieve similar returns, volatility or any characteristics similar to any actual portfolio.  The composition of a benchmark index may not reflect the manner in which any is constructed in relation to expected or achieved returns, investment holdings, sectors, correlations, concentrations or tracking error targets, all of which are subject to change over time. You cannot invest directly in an index. Index performance does not reflect the deduction of any investment management fees, transaction costs, or expenses, and the performance of any investment product may differ from the index.