Weekly Factor Returns

A look at what factors influenced the market last week

Equity markets declined last week. The small cap Russell 2000 fell 3.04%, followed by the large cap Russell 1000, which lost 1.99%, and the Russell MidCap, which lost 1.19%.

Value and Volatility were the story last week. Both factors experienced extreme movements across the capitalization spectrum.

Value was heavily favored. The most attractively valued securities outperformed the least attractive by a wide margin. The Value spread was +8.51% in the small cap universe, +8.07% among mid cap stocks, and +7.96% in the Russell 1000. All three spreads were well outside normal ranges. The small cap Value spread was greater than three standard deviations above average. The mid and large cap spreads were each greater than four standard deviations above their respective averages.

Volatility was sharply negative. The most volatile stocks severely underperformed the least volatile stocks, on average. The negative Volatility spread was greatest in the mid cap universe where it was just under -10% (-9.97%). Volatility was -9.72% in the large cap space and -8.64% within the Russell 2000. The large and small cap Volatility spreads were just under three standard deviations below their averages. The mid cap Volatility spread was three standard deviations below its average.

Medium-term momentum (MTM) reversed slightly as the biggest outperformers over the past six months tended to underperform last week. The MTM spread was -1.53% in the Russell 1000.

Short-term momentum (STM) was strong in the small cap universe, where the most recent winners continued to outperform the most recent losers by 3.36%, on average. The small cap STM spread was greater than one standard deviation above average. STM was less influential in the large and mid cap indices.

Size contributed positively in the small company Russell 2000. The largest ten percent of companies outperformed the smallest ten percent by 3.21%, on average. The small cap Size spread was greater than one standard deviation above average. Size had diverging returns between the large and mid cap universes. Size was slightly positive among the large cap index and slightly negative among mid cap stocks.

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.