Weekly Factor Returns

A look at what factors influenced the market last week

Equity markets were mixed last week. The large cap Russell 1000 was positive while the Russell MidCap and small cap Russell 2000 each declined.

Several factors produced returns that exceeded normal expectations. Spreads were greatest for each factor within the large cap universe.

Medium-term momentum (MTM) was a strong driver of returns, particularly in the large and mid cap universes. Stocks that outperformed the most over the previous six months continued to outperform last week. The large cap MTM spread was +4.46% and the mid cap MTM spread was +4.02%. Both were greater than one standard deviation above their respective averages.

Short-term momentum (STM) was positive in the large and mid cap indices, while STM was flat in the Russell 2000. The STM spread was +2.37% in the Russell 1000 and was greater than one standard deviation above average.

Size was another contributing factor last week. The largest capitalized stocks tended to outperform the smallest within each index. The largest ten percent of stocks rose 3.18% more than the smallest ten percent in the Russell 1000. The large cap Size spread was greater than one standard deviation above average.

Volatility declined within each index. Investors sought lower Volatility stocks as the most volatile stocks tended to underperform.

Value was mixed. The most attractively valued stocks outperformed in the Russell 2000 and underperformed in the Russell 1000. Value was flat and not a driver of returns in the Russell MidCap 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.

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.