Weekly Factor Returns

A look at what factors influenced the market last week

Equities were higher for the first full week of the year. Small caps led with the Russell 2000 gaining 4.63%. Mid caps had the second-highest return (+2.70%) and the Russell 1000 had the smallest gain at 1.65%.

Factor spreads were directionally similar across the capitalization ranges. Several factors generated returns outside normal expectations.

Volatility was a driving factor. The most volatile stocks outperformed the least volatile, on average. Small cap Volatility experienced the greatest return (+3.91%). The small cap Volatility spread was greater than one standard deviation above its weekly average.

Value was out of favor last week. Stocks with the most attractive valuations tended to underperform those with weaker valuations. The small cap Value spread dominated the large and mid cap returns. The average return difference between the highest ranked and lowest ranked Value stocks in the Russell 2000 was -4.29%. The small cap Value spread was greater than two standard deviations below its average.

Smaller stocks outperformed larger issues within each index. Size was most negative in the Russell 1000 where the factor has a greater influence on the overall index, relative to the mid and small indices. The -2.76% return for large cap Size was greater than one standard deviation below its average.

Stocks that had outperformed the most over the past four weeks continued to outperform last week. Short-term momentum (STM) returns were sharply positive in the large (+2.54%) and mid cap (+2.73%) universes where each spread was greater than one standard deviation above their respective averages.

Medium-term momentum (MTM) was slightly negative across each index and not a significant driver of returns.

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.