Weekly Factor Returns

A look at what factors influenced the market last week

Equities were mixed last week. The large cap Russell 1000 gained 1.15%, while the small cap Russell 2000 lost 0.79%. The Russell MidCap was essentially unchanged with a 0.02% return.

Several factors had diverging returns between the capitalization ranges. Two factors produced spreads outside normal expectations.

Medium-term momentum (MTM) was a positive influence. Stocks that had risen the most over the preceding six months continued to be the best performers last week. MTM rose 1.69% in the large cap universe and by 1.46% among mid caps. MTM rose the most in the small cap universe (+2.99%). The small cap MTM spread was greater than one standard deviation above average.

Short-term momentum (STM) was only positive in the small cap index. Stocks that had risen the most over the preceding four weeks continued to be the best performers last week. The best performers over the past month tended to underperform in the large and mid cap indices. The mid cap STM spread was -1.19%.

Size contributed positively in the larger indices, but was a negative influence among small caps. The largest ten percent of stocks in the Russell 2000 underperformed the smallest ten percent by 1.34%, on average. Larger companies outperformed smaller capitalized issues in the Russell 1000 and Russell MidCap indices.

Value was well out of favor in the two larger capitalized indices. The most attractively valued stocks underperformed the least attractively valued by 2.86% in the Russell MidCap and by 2.73% in the large cap space. Both negative Value spreads were greater than one standard deviation below their averages. Value was a positive influence among small caps.

Volatility was positive, albeit mild, across the capitalization spectrum. Each Volatility spread was below +1.0%.

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.