Weekly Factor Returns

A look at what factors influenced the market last week

Equity markets were mixed in the shortened holiday week. The large cap Russell 1000 gained 1.78% and the Russell MidCap gained 0.69%. The small cap Russell 2000 declined by 0.42%.

Factor returns were directionally similar across each capitalization range. Several spreads exceeded normal expectations.

There was a large Medium-term momentum (MTM) reversal last week. MTM sold off in each index. The MTM decline was led by small caps, which experienced a -5.82% MTM return. The negative MTM spread among small caps was greater than two standard deviations below average. The large and mid cap MTM spreads were each greater than one standard deviation below average.

Short-term momentum (STM) also experienced a reversal. Stocks that had outperformed the most over the past four weeks tended to underperform last week. STM declined by 3.04% in the small cap universe. The STM spread was greater than one standard deviation below average.

Size was a negative influence. The largest ten percent of companies underperformed the smallest ten percent, on average, within each capitalization range. Size declined the most in the Russell MidCap index (-2.69%). The mid cap Size spread was greater than one standard deviation below average.

Value was not in favor last week. Stocks with the most attractive valuations tended to underperform relative to those with less favorable valuations.

Volatility was positive, particularly among mid cap stocks. The most volatile stocks outperformed the least volatile, on average. Volatility rose by 0.88% in the mid cap universe.

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.