May 2020 Monthly Factor Performance Analysis

May 2020 Factor Performance Overview

Our May 2020 Factor Performance report is freely available to be shared and quoted so long as all references are sourced to Style Analytics. How to read the charts Throughout this document, you will see several charts similar to the one shown in Figure 1, providing the relative quarterly factor performance for a series of sub-factors in seven distinct factor groups: Value, Yield, Growth, Quality, Size, Volatility and Momentum. This report covers three distinct regions: US, Europe and Emerging Markets.   US Factor Performance May 2020

Figure 1: Monthly performance chart for 23 sub-factors in 7 factor groups for US Equities in May 2020. Source: Style Analytics

Each factor’s performance is based on the relative performance of the top 50% (by market cap) of that specific factor compared to the overall market (the sole exception is the size factor which uses the top 70%). For example, for the first factor, book-to-price, we determine the period’s performance of the basket of stocks with the highest book-to-price values relative to the total market. Each factor is analyzed independently and market and fundamental data are adjusted so that sector-average (within each country) relative data is used and the performance measurement isolates the factor’s contribution to return. For example in Figure 1, stocks with a high book-to-price (i.e. high value stocks as measured by book-to-price) underperformed the broad market by 50 bps on a country and sector adjusted basis. In addition to these monthly summary posts, more detailed analysis packs are available which provide views across different time horizons.  If you would like to see those, you can email us at or contact us through our website at May’s markets continued April’s rally around the world but with muted gains compared to April’s: US equities rose 5.7%, European equities rose 5.7% and equities in Emerging Markets rose only 1.6%. May’s factor profile, like April’s showed only small difference between factors. Unlike April, the three regions did not show consistent relative factor performances except for Value’s continued drop, likely due to the markets pessimistic economic outlook around the world. You can download the PDF version of this report here.

US Equity Factor Performance May 2020

May’s market rally - shown in Figure 1 above and reproduced below for ease of viewing, from a factor perspective, was a muted but close cousin to April’s strong factor differences when Growth and High Volatility beat the markets. This month, only High Volatility consistently beat the market with all of its sub-factors posting 80 bps+ outperformance. Two Growth sub-factors, Sales and Earnings Growth, posted outperformance and only one Quality factor: Low Gearing (low leverage) outperformed. US Factor Performance May 2020As we reported in our recent analysis of factors in crashes and recoveries, the profile shown in Figure 2 is not the typical factor signature expected in a recovery from a recent crash. Although May does favor high Volatility and Small Cap like a typical recovery (and as April did), Value stocks continued their downward trend. Just like in April, Growth’s returns are after adjusting for industry returns, so this outperformance is above any outperformance by tech stocks. The only Quality factor of note is Low Gearing – the market rewarded those companies that had less debt in a period when many companies took on the government’s support package in the form of (likely forgivable) debt.

European Equity Factor Performance May 2020

Although Europe had the same overall market return as the US had in May, their factor signatures were very different with European Growth, Quality and Momentum sub-factors all unanimously outperforming the market, albeit by no more than 50 bps. Unlike most recoveries from market crashes, Value, Yield and High Volatility all underperformed. Small cap stocks eked out a tiny gain (the yellow bar shows the large cap slightly underperformed). This is essentially the opposite of how equity factors typically behave during recoveries.

Emerging Markets Equity Factor Performance May 2020

Emerging Markets delivered the weakest returns of the three regions with only 160 bps of gains overall. Virtually all sub-factors underperformed the sluggish market on a country and sector adjusted basis, with Growth subfactors posting the largest relative losses. All Emerging Markets sub-factors posted similarly small sized over/under performance to the Developed markets analyzed above.

Regional Comparison of Equity Factor Performance in May

The figure above shows all three regions for May and big differences in factor profiles between regions. Similarities:

  • All Value sub-factors underperformed everywhere, indicating that the market sees no improvement in underlying economic conditions anytime soon
  • Yield did poorly consistent with Value’s pessimistic economic outlook
  • Low Gearing (low leverage) was the only consistent Quality factor to do well, rewarding those companies with low existing debt during a period in which many companies took on debt to weather the COVID economic conditions.


  • Growth did well in developed markets, especially in Europe but very poorly in Emerging Markets
  • High Volatility, usually a strong outperformer in recoveries, only did well in the US
  • Momentum was mixed with consistency only in Europe.

Other reports: JPMorgan published an interesting factor report that we think is worth a read.

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