Weekly Factor Returns

A look at what factors influenced the market last week

The Russell 2000 declined 1.32% while the Russell 1000 was essentially flat (+0.05%). The large daily moves in the broad indices last week provided for outsized factor returns.

Medium-term momentum (MTM) and Size (Capitalization) were the two most influential factors. The small cap spreads were double that of large cap in those two factors.

MTM experienced a decile 1 minus decile 10 spread of +8.67%. This was a three standard deviation event. The stocks that had outperformed the most during the six months prior to last week continued to outperform by a wide margin over the stocks that underperformed the most during the prior six months. The MTM spread in the large cap universe was +4.34%, a 1.5 standard deviation move.

Size was positive as investors sought larger companies during the market declines. The largest companies in the Russell 2000 outperformed the smallest by 4.97% last week. This was greater than two standard deviations above average. The large cap Size spread was +2.39%, which was also greater than one standard deviation above average.

Short-term momentum (STM) experienced a reversal in the large cap universe. The STM spread was -2.82%. This was also one standard deviation below average.

Volatility was the lone factor with divergent returns. Volatility was positive in the large cap universe and negative among small caps.

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.