Weekly Factor Returns

A look at what factors influenced the market last week

Equities declined last week. The large cap Russell 1000 had the steepest loss. It was the fourth consecutive week of declines for mid and small cap stocks.

Factor returns were directionally similar across the capitalization spectrum. All spread were within expected ranges.

Volatility was lower last week as investors sought stocks with lower price Volatility during the market’s decline. Stocks exhibiting the highest Volatility underperformed those with the least Volatility by 2.2% in the large and small indices. Volatility was -2.3% in the mid cap universe.

Momentum returns had opposite returns between the two time periods. Medium-term momentum (MTM) reversed trend last week, while Short-term momentum (STM) was positive. Stocks that had outperformed the most over the preceding six months tended to underperform last week. Stocks that had outperformed the most over the preceding four weeks continued to outperform last week.

Value was a positive driver with the largest influence in the Russell 1000 index where the most attractively valued stocks outperformed the least attractively valued by over 1.0%, on average. The small cap Value spread was +0.60%.

Size was negative as smaller companies were favored relative to the largest capitalized securities. Size declined in the Russell 1000 where the factor has a greater influence on the overall index compared to the Russell MidCap and Russell 2000.

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.