Weekly Factor Returns

A look at what factors influenced the market last week

Equities made strong gains last week. The smaller capitalized Russell 2000 led with an 8.61% gain while the Russell 1000 rose 4.91%.

One small cap factor spread, and four of five large cap factor spreads exceeded normal expectations.

Short-term momentum (STM) had the largest returns within each index. Stocks that outperformed the most during the prior four weeks continued to outperform last week. The STM spread was +4.17% in the Russell 1000 and +4.33% in the Russell 2000. Both were greater than one standard deviation above the weekly average.

In the large cap space, higher Medium-term momentum (MTM), weak Value, and higher Volatility were the other key factor themes. Each of these spreads were greater than one standard deviation from their averages. The top-ranked Value stocks underperformed the lowest-ranked by 3.12% in the large cap universe. The most volatile stocks outperformed relative to the least volatile by 3.70%. MTM had a +3.65% spread.

Other than STM, factor returns were more muted in the Russell 2000 compared to the large cap spreads.

Size was negative in each universe, as smaller companies tended to outperform versus larger capitalized stocks in each index. Size has more of an influence on the Russell 1000 than it does on the Russell 2000.

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.