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A look at what factors influenced the market last week
Equity markets were mixed during the New Year’s holiday week. The large cap Russell 1000 declined 0.34% while the small cap Russell 2000 gained 1.13%.
Large cap factor returns were within normal ranges. Small cap Size, Value, and Volatility spreads each exceeded normal expectations.
Smaller capitalized, weaker Value, and higher Volatility stocks were the largest drivers within the Russell 2000 index. The largest companies in the small cap universe underperformed the largest by 4.18%, on average. The negative small cap Size spread was almost two standard deviations below average.
The most attractively valued stocks underperformed the least attractively valued by 3.07%. The negative small cap Value spread was 1.6x standard deviations below average.
High Volatility was in favor within both indices. Volatility rose 2.68% in the Russell 1000 and was +5.05% in the Russell 2000. The small cap Volatility spread was 1.6x standard deviations above its weekly average.
Short-term momentum (STM) reversed by about 90 basis points in each index. Medium-term momentum (MT) was mixed and less influential.
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.