Weekly Factor Returns

A look at what factors influenced the market last week

Equities sold off last week. Each major index declined by at least 2%. The small cap Russell 2000 fell 4.03%, the Russell MidCap fell 3.62%, and the large cap Russell 1000 lost 2.06%.

Several factors generated spreads outside normal ranges. Both measures of momentum reversed last week.

Medium-term momentum (MTM) was sharply negative. The stocks that outperformed the most over the previous six months underperformed last week. The MTM spread was -5.39% in the Russell 1000 and -5.65% in the Russell MidCap. Each spread was two standard deviations below their averages. The small cap MTM spread was greater than one standard deviation below average.

Short-term momentum (STM) had a similar return profile to MTM. Stocks that outperformed the most over the past four weeks underperformed last week. The most recent winners underperformed the recent losers by 4.85% in the Russell 1000, by 5.09% in the Russell MidCap, and by 3.81% in the Russell 2000. The large and mid cap STM spreads were greater than two standard deviations below their averages. The small cap STM was greater than one standard deviation below average.

Size was negative. Smaller stocks tended to outperform larger stocks. The largest ten percent of stocks underperformed the smallest ten percent by 2.82% in the Russell 2000. The Size spread was -2.46% in the mid cap universe. Size was less negative in the Russell 1000 where larger companies have a disproportionate influence on the broader index relative to the small and mid cap indices. The small and mid cap Size spreads were greater than one standard deviation below their averages.

Value was mixed across the capitalization spectrum. Value was in favor in the large and mid cap indices but not influential in the small cap index. The most attractively valued stocks underperformed the least attractively valued by 1.15% in the Russell 2000.

Volatility was positive in each index but was not influential to returns. The most volatile stocks slightly outperformed the least volatile in each 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.