.png)
A look at what factors influenced the market last week
Equity markets had mixed results last week. Large cap stocks rose, while small cap stocks declined. The Russell 1000 index gained 1.16%. The Russell 2000 index dropped 3.11%.
Factor returns were directionally similar between the large and small Russell indices. Small cap factor spreads were significant as each experienced a return of at least one standard deviation from its average. In the large cap universe, Size was the most prominent factor, with a spread greater than two standard deviations above its average.
Lower Volatility stocks were in favor. The average return between Decile 1 (high Volatility) and Decile 10 (low Volatility) stocks was -4.97% in the Russell 1000 and -4.54% in the Russell 2000.
Size was another key influencer of index returns. The largest companies outperformed the smallest companies by 4.80% in the large cap space and by 3.54% among small caps. The Size factor is more influential in the Russell 1000 compared to the Russell 2000 and was a large reason for the divergence between the index returns.
Medium-term momentum (MTM) was the third factor with a similar spread within each index. Stocks that had outperformed the most over the previous six months continued their outperformance last week.
The most attractively valued stocks outperformed by 3.00%, on average, in the Russell 2000. Value was less influential in the Russell 1000.
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.
Comments