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Weekly Factor Returns

A look at what factors influenced the market last week

The Russell 1000 and Russell 2000 indices were sharply higher last week. The large cap index gained 6.10% while the small cap index gained 4.64%. Factor spreads were directionally similar and extreme. Four of the five key factors returns’ fell outside expected ranges.

Short-term momentum (STM) experienced the greatest return on an absolute basis and relative to its own history. Stocks that had outperformed the most over the last month reversed last week and underperformed those with less STM by 9.10% in the Russell 1000 and 8.96% in the Russell 2000. Both returns were more than three standard deviations below the factor’s long-term average.

Medium-term momentum (MTM) returned -7.31% and -7.60% in the large and small cap universes, respectively. Relative to history, they were 2.6 and 2.8 standard deviations below their weekly averages.

Size, or lack thereof, was also a contributing factor. Smaller companies outperformed larger ones in each index. Size spreads were also over 2.5 standard deviations below their respective averages.

Volatility was the lone factor with a positive return. Stocks with the highest volatility outperformed those with the least volatility by 9.00% in the Russell 1000 and by 6.28% in the Russell 2000. The spread within the large cap space was 2.7 standard deviations above its long-term average. The Volatility spread within the Russell 2000 represented a two standard deviation move.

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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