Weekly Factor Returns

A look at what factor returns influenced the market last week

Small and mid cap stocks rose sharply last week with gains of 2.18% and 2.60%, respectively. The large cap Russell 1000 was negligible (+0.06%). The Russell 2000 and Russell MidCap experienced a positive reversal after two weeks of declines.

Factor spreads were robust, particularly within the large and mid cap universes. Each factor had a return that exceeded normal expectations in at least one index.

Value was a key driver of performance last week. The most attractively valued stocks outperformed the least attractively valued by 1.72% in the small cap universe. The small cap Value spread was greater than one standard deviation above average. Value spreads were 6.66% in the Russell 1000 and 6.87% in the Russell MidCap. The large and mid cap Value spread each exceeded three standard deviations above their averages.

Low Volatility was an influential aspect of returns. The most volatile stocks in each index underperformed the least volatile, on average. The large cap Volatility spread (-3.43%) was just greater than one standard deviation while the mid and small Volatility spreads were just below.

Medium-term momentum (MTM) was the only other factor with directionally similar returns. Stocks that had outperformed the most over the previous six months continued to outperform last week. MTM’s spread within the mid cap universe was 3.32% and greater than one standard deviation above average.

Short-term momentum (STM) was positive in the Russell 1000 and Russell MidCap indices. STM experienced a small reversal in the Russell 2000. The large and mid STM spreads were each above 2.50% as stocks that had outperformed the most over the past four weeks continued to outperform in those indices. Each of the two positive spreads were greater than one standard deviation above average.

Smaller stocks tended to outperform in the Russell 1000 and Russell MidCap. The largest ten percent of companies underperformed the smallest ten percent by 3.22%, on average, in the large cap index. The large cap Size spread was greater than one standard deviation below average. Size returned -2.15% in the mid cap index. Size was negligible in the small cap 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.