Weekly Factor Returns

A look at what factors influenced the market last week

Equities were positive in the holiday-shortened week. The small cap Russell 2000 rose 1.24% while the large cap Russell 1000 rose 0.87%. The Russell MidCap index had a marginal gain of 0.09%.

Factor returns were mostly congruent. Two factors produced spreads that exceeded normal expectations.

Volatility was a driving force of returns last week. The most volatile stocks outperformed the least volatile by 3.49%, on average, in the small cap index. The Volatility spread was just over 3% in the large and mid cap indices. The small cap Volatility spread was greater than one standard deviation above its average.

Value was not favored last week. The most attractively valued stocks underperformed the least attractively valued by a wide margin across each index. Value declined by 3.68% in the Russell 2000, 3.87% in the Russell MidCap, and by 3.65% in the Russell 1000. The small cap Value spread was greater than one standard deviation below its average, while the large and mid cap Value spreads were each greater than two standard deviations below their averages.

Short-term momentum (STM) experienced a reversal. Stocks that had outperformed the most over the previous four weeks tended to underperform last week. STM declined the most in the mid cap universe.

Size was a positive influence. The largest ten percent of companies outperformed the smallest ten percent by 1.37% in the mid cap index. Size was +0.69% in the large cap index an only +0.19% in the small cap index.

Medium-term momentum (MTM) was insignificant to market returns.  

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.