Weekly Factor Returns

A look at what factors influenced the market last week

The broad equity indices were lower last week. Small caps (Russell 2000 -1.86%) and large caps (Russell 1000 -1.59%) declined the most. The Russell MidCap index fell by 0.35%.

Value and Volatility were the main drivers last week in each capitalization range, particularly small cap.

Size and both measures of Momentum produced similar spread profiles across each index. Returns were positive among large and mid cap stocks but negative in the small cap universe.

Medium-term (MTM) and Short-term (STM) momentum rose in the Russell 1000 and Russell MidCap. Stocks that outperformed over the previous six months and four weeks continued to outperform last week in those indices. Medium-term and short-term outperformers reversed trend last week in the Russell 2000.

Size had some influence among the larger issues. The largest capitalized stocks tended to outperform the smallest in the Russell 1000 and Russell Midcap. The smallest ten percent of stocks outperformed the largest ten percent, on average, by 0.56% in the Russell 2000.

Value was a clear performance driver across all stocks. The most attractively valued securities outperformed the least attractive by 3.65% and 4.07% in the large and mid cap universes, respectively. The large cap spread was greater than one standard deviation above average, while the mid cap spread was two standard deviations above average. In the small cap universe, the Value spread was +7.36%. This equated to a three standard deviation move.

Low Volatility stocks were in favor. Volatility was strongly negative, which is unsurprising considering Value and Volatility’s inverse correlation. The most volatile stocks underperformed the least volatile by 4.60% among large caps and by -4.79% in the mid cap universe. Both spreads were greater than one standard deviation below their averages. Within the Russell 2000, Volatility was -6.35% as the least volatile stocks outperformed the most volatile, on average. The small cap Volatility spread was two standard deviations below average.

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.