Weekly Factor Returns

A look at what factors influenced the market last week

Equities were flat-to-negative last week. The small cap Russell 2000 declined 2.34% while the large cap Russell 1000 was essentially unchanged. It was the first time in the last eight weeks that none of the indices had a positive return.

Several factor returns were outside normal expectations.

Medium-term momentum (MTM) was a major component of returns. Stocks that outperformed the most over the previous six months continued to outperform last week. MTM rose by 5.23% in the small cap universe and by 4.12% among large caps. All three spreads were greater than one standard deviation above their averages.

Size was another positive contributing factor. The largest ten percent of companies in each index outperformed the smallest ten percent, on average. The Size spread was +4.11% in the Russell 2000 and +3.71% in the Russell 1000. The mid cap Size spread was +2.39%. All three spreads were greater than one standard deviation above their averages.

Value was out of favor, particularly among small caps. The most attractively valued stocks underperformed the least attractively valued by 3.02% in the Russell 2000. The small cap Size spread was greater than one standard deviation below its average.

Volatility was lower in the larger capitalized indices. The most volatile stocks underperformed the least volatile by 1.75% in the large cap universe. Volatility was flat in the small cap index.

Short-term momentum (STM) was slightly positive in the mid and small cap indices and less influential relative to the other factors.

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.