Weekly Factor Returns

A look at what factors influenced the market last week

Equities posted a negative week to finish the first month of the year. The large cap Russell 1000 declined 0.89% and the small cap Russell 2000 declined 0.86%.

Low Volatility and a Momentum reversal were key themes driving the market last week.

Stocks exhibiting lower Volatility tended to outperform during the market’s decline. Stocks ranked highest on Volatility underperformed those with the lowest rankings by 1.78% in the large cap universe and by 3.37% among small caps. The negative small cap Volatility spread was greater than one standard deviation below average.

Both measures of Momentum declined. Stocks that had outperformed over the past six months (Medium-term) and four weeks (Short-term) each underperformed, on average, last week.

Size and Value were each mixed between the two indices. In the Russell 2000, larger stocks with more attractive Value were favored relative to those with the opposite characteristics. Size and Value were slightly negative, thus less influential 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.