Weekly Factor Returns

A look at what factors influenced the market last week

Equities were negative last week. The large cap Russell 1000 led the decline with a 1.52% drop. The small cap Russell 2000 lost 0.51% and the Russell MidCap dropped 0.58%.

Two factors dominated last week and each had spreads that exceeded normal expectations.

Value was heavily favored. Stocks with the most attractive valuations outperformed those with the weakest valuations, on average. The mid cap Value spread was +5.07%, the small cap Value spread was +4.90%, and the large cap Value spread was +4.72%. All three returns were greater than two standard deviations above their respective averages.

Volatility declined sharply. Stocks with the highest price Volatility underperformed those with more stable price returns. Volatility declined 6.23% in the mid cap universe. The large cap Volatility spread was -6.11% and the small cap Volatility spread was -5.87%. Each return was greater than one standard deviation below its average.

Medium-term momentum (MTM) was lower. Stocks that had outperformed the most over the previous six months tended to underperform last week. MTM declined by 1.67% among small caps.

Short-term momentum (STM) was negligible in the large and mid cap indices. STM was positive in the Russell 2000. Stocks that outperformed the most over the previous four weeks in the small cap universe continued to outperform last week.

Size had diverging returns within the capitalization ranges. Smaller companies outperformed larger issues in the Russell 1000 and Russell MidCap indices. Within the Russell 2000, the smallest ten percent of companies outperformed the largest ten percent.

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.