Weekly Factor Returns

A look at what factors influenced the market last week

Major equity indices ended negatively last week. Small caps led the decline with a 3.49% drop in the Russell 2000. The large cap Russell 1000 dropped 1.90%.

Small cap factor returns dominated their large cap counterparts. Size, Value, and Volatility each had outsized returns that exceeded normal ranges.

Volatility was negative, particularly in the Russell 2000. The most volatile stocks underperformed the least volatile by 5.50%. The negative Volatility spread in the small cap universe was 1.7 standard deviations below its weekly average. The Volatility spread in the Russell 1000 was -0.80%.

Attractively valued stocks were favored last week. The highest ranked stocks, according to valuation, outperformed the lowest ranked by 4.26% among small caps. The strong positive small cap Value spread was just below two standard deviations above average (1.9x).

Size was another significant factor in the Russell 2000 index. The largest stocks outperformed the smallest stocks by 4.53%, on average. The small cap Size spread was over two standard deviations above its weekly average.

Short-term momentum (STM) was positive in each index. Stocks that had the greatest outperformance during the previous four weeks continued to outperform last week. Medium-term momentum (MTM) was mixed between the two indices. MTM experienced a reversal last week within the Russell 2000. MTM was not a meaningful driver of returns in the Russell 1000.

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.