Weekly Factor Returns
A look at what factors influenced the market last week
The Russell 1000 and Russell 2000 each finished the first week of the year positively. The large cap index gained 1.45% and the small cap index gained 1.81%. Factor returns were mostly within normal ranges.
Medium-term momentum (MTM) experienced a strong reversal last week, particularly among small caps. The spread between the highest-momentum and least-momentum stocks was -3.08% in the Russell 2000 and -1.73% in the Russell 1000. The small cap MTM spread was the only factor move that exceeded one standard deviation.
More attractively valued and smaller capitalized companies tended to outperform those with the opposite characteristics in each universe. Value had a bigger influence among large caps (+1.76%), while smaller Size (-1.62%) was more influential in the small cap universe.
Short-term momentum (STM) and Volatility had diverging spreads between the Russell 1000 and 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.