Weekly Factor Returns

A look at what factors influenced the market last week

Domestic equities were positive last week. It was the second consecutive week of gains for all three Russell indices. The large cap Russell 1000 rose 2.20%, the small cap Russell 2000 rose 1.73%, and the Russell MidCap rose 0.98%.

Factor spreads were directionally congruent in four of the five factors. Two factors experienced returns outside normal expectations.

Medium-term momentum (MTM) was the lone factor with dissimilar return profiles across each capitalization segment. MTM was positive in the large and mid cap universes and negative among small caps. Stocks that performed best over the previous six months continued to outperform in the Russell 1000 and Russell MidCap. MTM reversed in the Russell 2000. Stocks that had outperformed the most over the past six months tended to underperform last week.

Short-term momentum (STM) was positive, particularly among large and mid cap stocks. The biggest winners of the past four weeks outperformed the biggest losers by 4.70% in the large cap index and by 4.67% in the mid cap space. The mid cap spread was greater than one standard deviation above average. The large cap STM spread was two standard deviations above its average.

Size was a positive influence on returns. In the Russell MidCap index, the largest ten percent of stocks by capitalization outperformed the smallest ten percent by 3.11%, on average. The mid cap Size spread was greater than one standard deviation above average.

Value was not in favor last week. The most attractively valued stocks in each index underperformed the least attractively valued.

Volatility had positive returns. The most volatile stocks outperformed the least volatile, on average. The small cap Volatility spread was 2.15%.  

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.