Weekly Factor Returns

A look at what factors influenced the market last week

Equities were negative during the four trading days last week. The small cap Russell 2000 declined by 3.69% while the large cap Russell 1000 declined by 1.93%.

Factor returns were directionally similar between the two indices. Momentum and Volatility experienced outsized spreads.

Volatility had the largest spreads in each index. Lower Volatility was favored during the broader market’s decline. The most volatile stocks underperformed the least volatile by 5.10% in the small cap index and by 4.37% among large caps. Each spread was greater than one standard deviation below its average.

Momentum was negative at both the medium- and short-term intervals. The biggest reversal was Medium-term momentum (MTM) within the large cap universe. MTM declined by 4.58% in the Russell 1000. The negative large cap MTM spread was greater than one standard deviation below average.

The stocks that had outperformed the most over the previous four weeks underperformed last week. Short-term momentum (STM) declined sharply in each universe. STM was -3.05% in the Russell 1000 and -2.67% among small cap stocks. Both spreads were greater than one standard deviation below their averages.

More attractively valued stocks outperformed those with weaker valuations, on average. Value was a stronger influence in the large cap index.

The largest ten percent of stocks outperformed the smallest decile by 1.79% in the Russell 2000. Size was 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.