Weekly Factor Returns

A look at what factors influenced the market last week

Equity markets were positive during the four trading days ending February 20^th. Large cap stocks led (Russell 1000 +1.11%) followed by mid caps (Russell MidCap +1.00%) and lastly the Russell 2000, which rose 0.67%.

Factor returns were directionally similar across each index. Factor returns were generally strongest in the Russell 1000. All spreads were within normal ranges.

Volatility experienced the largest returns among the large and mid cap indices. The most volatile stocks outperformed the least volatile by 2.60% and 2.89% in the Russell 1000 and Russell MidCap, respectively. Volatility was less influential among small caps.

Short-term momentum (STM) reversed last week. Stocks that had outperformed the most over the previous four weeks underperformed last week. STM declined the most in the large cap index (-1.60%).

Medium-term momentum (MTM) was a positive influence on returns. Stocks that had outperformed the most over the previous six months tended to outperform last week. MTM was highest in the large cap universe, where the spread was +1.38%.

Size was a negative influence on returns. Larger companies underperformed, on average, compared to smaller companies. Size declined the most (-1.25%) in the Russell 1000 where the factor has a larger influence than it does in the mid and small cap universes.

Value was positive in the large and small cap indices and negligible in the mid cap space.

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.