Factor Lab Daily Report 2026-07-06
Momentum factor dominates with ICIR +2.70; value factors (EP, FCF Yield, ROE) all significantly negative; Information Technology sector momentum IC hits +0.524
Full Factor IC Test
| Factor | Mean IC | ICIR | p-value | Long-Short | Direction |
|---|---|---|---|---|---|
| Momentum (MOM) | +0.2241 | +2.6966 ⭐ | 0.0000 | -8.07% | Strong Positive |
| Volatility (VOL) | +0.1320 | +1.0508 ⭐ | 0.0000 | -7.61% | Positive |
| Size (SIZE) | +0.0479 | +1.2497 ⭐ | 0.0000 | -2.06% | Positive |
| Book/Price (BP) | +0.0056 | +0.0775 | 0.6355 | +0.82% | Not Significant |
| ROE | -0.0414 | -1.2298 ⭐ | 0.0000 | +1.11% | Negative |
| FCF Yield | -0.0589 | -1.4256 ⭐ | 0.0000 | +3.04% | Negative |
| Earnings Yield (EP) | -0.0624 | -0.7418 ⭐ | 0.0001 | +3.87% | Negative |
Key Takeaways:
- Momentum dominates — ICIR +2.70 is the strongest across all factors, but long-short return is -8.07%, signaling a classic momentum reversal: prior winners are being sold off.
- Value factors all dead — EP (-0.74), FCF Yield (-1.43), ROE (-1.23) all show significant negative IC. The market doesn’t care about fundamentals right now.
- Volatility & Size positive — High-vol small caps are generating excess returns, a hallmark of elevated risk appetite.
- Anomaly check: all clear — No factor shows extreme deviation from historical ranges.
Sector Momentum Breakdown
| Sector | Mean IC | ICIR | Long-Short | Trend |
|---|---|---|---|---|
| Info Tech | +0.5240 | +2.5836 ⭐ | -28.54% | 🔥 Strongest |
| Financials | +0.3094 | +2.6260 ⭐ | -7.19% | Strong |
| Industrials | +0.2659 | +2.8780 ⭐ | -7.14% | Strong |
| Cons. Discretionary | +0.2522 | +2.1104 ⭐ | -6.21% | Positive |
| Utilities | +0.1993 | +1.0065 ⭐ | -0.63% | Weak |
| Cons. Staples | +0.2088 | +1.3410 ⭐ | -4.67% | Positive |
| Real Estate | +0.1242 | +0.8397 ⭐ | -3.83% | Weak |
| Health Care | -0.1280 | -1.2058 ⭐ | +7.51% | 🔄 Only Reversal |
Sector Momentum Key Judgment:
- Info Tech momentum IC at +0.524 but long-short -28.54% — prior tech winners are experiencing violent mean reversion. Classic anti-momentum signal.
- Health Care is the only negative IC sector — IC -0.1280, long-short +7.51%, prior laggards are bouncing.
- Financials and Industrials follow tech — similar pattern of prior winners pulling back.
Overall Assessment
Momentum reversal signal is clear. Market-wide momentum IC is positive but long-short returns are negative, indicating capital rotation out of prior winners (Tech, Financials) into prior laggards (Health Care). Value factors’ complete failure reinforces the “fundamentals don’t matter, sentiment-driven” market regime.
Strategy implications: Avoid chasing tech in the short term; monitor Health Care rebound sustainability; stay away from value strategies until EP/FCF IC turns positive.