Weekly Factor Returns

A look at what factors influenced the market last week

Equities were lower last week. The Russell 2000 declined by 2.25% and the Russell 1000 declined by 0.79%. This was the second straight week of losses for the small cap index.

Factor returns were directionally similar between the two indices. Small cap spreads dominated their large cap counterparts in four of the five key factors. Three small cap factor returns exceeded normal expectations.

Within the Russell 2000, Value and Volatility experienced opposing returns of equal magnitude. The spread between the most attractive and least attractively valued stocks was +3.27%. The spread between the most volatile stocks and the least volatile was -3.27%. Both spreads were greater than one standard deviation from their averages. The situation was similar in the large cap universe where the Value spread was +1.15% and Volatility returned -1.77%.

There was a sharp Medium-term momentum (MTM) reversal among small caps. The stocks that had outperformed the most during the previous six months underperformed last week. The small cap MTM spread of -2.60% was one standard deviation below average.

Short-term momentum (STM) was slightly positive in each index. Size was not a significant influence on market returns.

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.