Weekly Factor Returns
A look at what factors influenced the market last week
The Russell 1000 and Russell 2000 finished positive in the shortened-trading week ended July 8th, 2022. The Russell 1000 rose 2.04% and the Russell 2000 rose 2.43%. Factor returns were directionally similar. The magnitude of factor returns was greater among small caps.
For the second consecutive week, Medium-term Momentum and Volatility experienced the largest returns. Their directions reversed from the prior week, however. The highest-ranked Volatility stocks rose 6.93% more than the lowest ranked in the Russell 1000. The spread was greater among small caps, where it was 8.06%. Each was two-standard deviations above their historical averages.
Stocks exhibiting the highest momentum over the past six months underperformed the lowest momentum by 5.68% in the Russell 1000 and by 5.96% in the Russell 2000. Both Medium-term momentum moves were more than two standard deviations below their averages.
Negative returns to Value were smaller relative to Medium-term Momentum and Volatility but were greater relative to its own history. Value spreads were -4.04% in the Russell 1000 and -5.40% in the Russell 2000. Within the respective large and small cap universes, last week’s Value spreads were the most extreme among the five key factors, relative to each factor’s own history.
Overall, stocks with higher Volatility, higher Growth (low Value), and low Medium-term momentum characteristics fared better than those with the opposite traits.
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.