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Macro Disagreement and the Cross-Section of Stock Returns

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  • Frank Weikai Li

Abstract

This paper examines the effects of macro-level disagreement on the cross-section of stock returns. Using forecast dispersion measures from the Survey of Professional Forecasters database as proxies for macro disagreement, I find that high macro beta stocks earn lower future returns relative to low macro beta stocks following high macro disagreement states. This negative relation between returns for macro factors and macro disagreement is robust and exists for a large set of macroeconomic factors, suggesting that high macro beta stocks are overvalued compared with low macro beta stocks due to their greater sensitivity to aggregate disagreement.

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  • Frank Weikai Li, 2016. "Macro Disagreement and the Cross-Section of Stock Returns," The Review of Asset Pricing Studies, Society for Financial Studies, vol. 6(1), pages 1-45.
    • Handle: RePEc:oup:rasset:v:6:y:2016:i:1:p:1-45.
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    File URL: http://hdl.handle.net/10.1093/rapstu/rav008
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