Weekly Factor Returns

A look at what factors influenced the market last week

Equity markets were mixed last week. The Russell MidCap index led with a 1.42% gain, followed by the large cap Russell 1000, which gained 1.20%. Small caps declined. The Russell 2000 lost 0.90%.

Factor returns were congruent in the large and small cap universes. Small cap factor returns exhibited mostly diverging returns. Two factors produced spreads outside normal expectations.

Value was the lone factor with directionally similar spreads across the capitalization spectrum. Value was positive in each index with the strongest returns in the small cap index. The most attractively valued stocks outperformed the least attractively valued by 3.43%, on average, in the Russell 2000. The small cap Value spread was greater than one standard deviation above average.

Medium-term momentum (MTM) was mildly positive in the large and mid cap universes where the biggest gainers over the previous six months continued to outperform the biggest losers. MTM was negative in the small cap space.

Short-term momentum (STM) experienced a similar return profile as MTM, with each STM spread wider than its MTM counterpart. The most recent winners from the previous four weeks continued to outperform last week relative to the most recent losers in the large and small cap indices. STM experienced a reversal in the small cap universe.

Size was a positive contributor within the larger capitalized indices. The largest ten percent of stocks outperformed the smallest ten percent by 2.06%, on average, in the Russell 1000. The mid cap Size spread was +1.41%. Larger companies tended to underperform smaller issues in the Russell 2000.

Volatility was mildly positive in the large and mid cap indices. Volatility was sharply negative in the small cap universe. The most volatile stocks underperformed the least volatile by 2.70% in the Russell 2000.

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.