Weekly Factor Returns

A look at what factors influenced the market last week

Equity markets rose for the third consecutive week. The Russell 1000 gained 1.85% and the Russell 2000 gained 1.21%.

Several factor spreads were divergent between the large and small indices. Small cap factor returns were generally more pronounced compared to large cap spreads.

Medium-term momentum (MTM) experienced a strong reversal in the small cap index. The spread was -2.94%, which was greater than one standard deviation below average. MTM was positive in the Russell 1000.

Value was a positive driver of returns. Stocks with the most attractive valuations outperformed those with the least attractive valuations by 1.22% in the small cap universe and by 0.44% among large caps.

Volatility was negative, indicating stocks exhibiting lower Volatility were rewarded last week relative to those with the highest Volatility rankings. The Volatility spread in the Russell 2000 was -2.46% - still within the bounds of a normal distribution.

Size and Short-term momentum (STM) had mixed returns between the two indices. Larger stocks with positive STM tended to outperform relative to smaller stocks with negative STM in the large cap universe. The opposite was true in the small cap universe. Smaller stocks with negative STM tended to outperform.  

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.