Weekly Factor Returns

A look at what factors influenced the market last week

Equity markets were mixed in the holiday-shortened week ended January 19th. The large cap Russell 1000 rose 1.11% and the smaller capitalized Russell 2000 dropped 0.33%.

Small cap factor returns were extreme, with four of the five key factor spreads extending beyond one standard deviation. There was one large cap factor (Medium-term momentum) that experienced a one standard deviation move.

Volatility was out of favor. The spread between the highest ranked stocks based on Volatility and those ranked lowest was -4.09% among small caps and -2.12% in the large cap space. This means stocks with the least Volatility tended to outperform.

Value was a key driver in the small cap universe. The spread between the most attractively valued and the least attractive was 3.26%. Value was slightly negative and did not play a significant role in index returns within the Russell 1000.

Medium-term momentum (MTM) was strong in each index. Stocks that had outperformed the most over the previous six months prior to last week continued to outperform, relative to those with the least MTM in the prior six-month period.

Size was also an influence on returns. The largest capitalized stocks outperformed the smallest, on average, within each index.

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.