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Weekly Factor Returns

A look at what factors influenced the market last week

The Russell 1000 and Russell 2000 each experienced sharp declines last week. The Russell 1000 dropped 4.88% and the Russell 2000 dropped 6.58%. It was the second consecutive week of losses and the fifth out of the last six. Factor returns were congruent across large and small cap universes. Large cap factor returns were larger than their small cap counterparts for each category.

Volatility returns were greatest as investors shied away from high volatility stocks. The highest-ranking volatility stocks underperformed those with the least volatility by about 7.00% in each index. The factors’ returns were each greater than two standard deviations below their weekly averages.

Stocks with higher Medium-term momentum (MTM) outperformed those in the bottom 10% of MTM rankings by 4.05% in the Russell 1000 and by 3.05% in the Russell 2000. Short-term momentum (STM) spreads were close to 2.00%, indicating recent winners continued their outperformance last week.

Overall, stocks with larger market capitalizations and more attractive valuations tended to outperform those with the opposite characteristics.

1 week returns for medium-term momentum, short-term momentum, size, value, and volatility within large and small cap universes

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.



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