Weekly Factor Returns

A look at what factors influenced the market last week

Equities were negative during the final full week of the first quarter. The Russell 1000 and Russell 2000 have declined in five of the last six weeks.

Factor spreads were directionally similar across the two major indices. Three factors in each universe had returns that exceeded normal expectations.

Volatility was lower. The stocks with the highest Volatility underperformed those with the least Volatility by 4.32% in the large cap universe and by 5.37% among small caps. Each spread was greater than one standard deviation below its weekly average.

Value was positive as investors preferred relatively inexpensive stocks during the market decline. The most attractively valued stocks outperformed the least attractively valued by 2.79% in the Russell 1000 and by 3.37% in the small cap universe. Both spreads exceeded normal ranges.

Both measures of Momentum were influential in the large cap index. Medium-term momentum (MTM) experienced a reversal, while Short-term momentum (STM) continued to outperform last week. The large cap STM spread was greater than one standard deviation above average. MTM and STM had similar return profiles in the small cap universe, albeit smaller magnitudes relative to the large cap factors.

The average return between the largest ten percent of stocks and the smallest ten percent was +2.41% in the Russell 2000. This was greater than one standard deviation above average. Size was negligible in the large cap universe.

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.