Weekly Factor Returns

A look at what factors influenced the market last week

Major equity indices were mixed for the second straight week. The large cap Russell 1000 gained 0.27% while the small cap Russell 2000 declined 0.50%. Large cap size was the lone factor spread that exceeded normal expectations.

Stocks that outperformed in the large cap index tended to be larger and have been the best outperformers over the short- and medium-term horizons. Factor spreads were more muted in the small cap index, with all returns below 1.0%.

The largest companies in the Russell 1000 outperformed the smallest, on average, by 2.32%. This was greater than one standard deviation above the weekly average.

Both Medium-term (MTM) and Short-term momentum (STM) experienced spreads around 1.00% in the large cap universe.

Volatility had divergent spreads between the two indices. Higher Volatility stocks outperformed versus lower Volatility in the Russell 2000. Lower Volatility was favored in the large cap universe.

Outperforming stocks in the small cap index tended to have higher MTM and attractive valuations.

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.