Macro disagreement and the cross-section of stock returns

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 formacro disagreement, I find that high macro beta stocks earn lower future returns relative to lowmacro beta stocks following high macro disagreement states. This negative relation between returns for macro factors andmacro disagreement is robust and exists for a large set ofmacroeconomic factors, suggesting that highmacro beta stocks are overvalued compared with low macro beta stocks due to their greater sensitivity to aggregate disagreement.