Weekly Factor Returns

A look at what factors influenced the market last week

Equities were mixed last week. In a reversal from the previous week, large caps gained while mid and small cap stocks declined. The Russell 1000 rose 1.02%, the Russell MidCap dropped 0.33% and the Russell 2000 fell 0.60%.

Four of the five key factors were directionally similar. Several spreads exceeded normal expectations.

Medium-term momentum (MTM) was strong in the large and mid cap indices with each spread over 2.0%. Stocks that outperformed the most over the preceding six months continued to outperform last week.  MTM was less positive in the small cap universe.

Short-term momentum (STM) experienced a sharp reversal, particularly among large and mid cap stocks. Stocks that performed best over the preceding four weeks tended to underperform last week. The large cap STM spread (-2.55%) was one standard deviation below its average. The mid cap STM was -2.34%.

Size was less influential and the lone factor with diverging returns among capitalization ranges. Larger companies were favored in the Russell 1000 and, to a lesser degree, in the Russell MidCap. Smaller companies outperformed larger companies, on average, within the Russell 1000.

Value heavily favored last week. The most attractively valued stocks outperformed the least attractive across each index. The large cap Value return was 2.63% and the mid cap Value return was 2.50%. Each spread was greater than one standard deviation above its average.

Volatility declined in each index. The most volatile stocks underperformed the least volatile. The mid and small cap Volatility spreads were each about -2.0%.

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.