Weekly Factor Returns

A look at what factors influenced the market last week

Equity markets were higher last week. The Russell 1000 rose 2.71% while the Russell 2000 rose 5.60%. There were several large factor spreads. All five large cap factor returns were greater than one standard deviation.

Volatility was the biggest influence in each index. The highest Volatility stocks within the large cap universe outperformed the least volatile by 7.20%. The large cap Volatility spread was greater than two standard deviations above the weekly average. The small cap Volatility spread was 4.44%.

There was a reversal in Medium-term momentum (MTM) last week. Within the large cap index, the biggest winners over the previous six months underperformed last week by 5.48% relative to the worst group of stocks over the previous six months. MTM declined by 3.24% among small caps.

Within the small cap universe, Short-term momentum (STM) was positive, Size was negative, and Value was negative. Each spread was within normal ranges. In the large cap index, STM, Size, and Value were directionally similar to the small cap universe, yet with more extreme moves.

Small cap stocks were favored compared to larger companies in the Russell 1000. The negative Size spread was 3.46% - a 1.5 standard deviation move.

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.