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Macroeconomic Expectations and the Size, Value, and Momentum Factors


  • Mikael C. Bergbrant,

  • Patrick J. Kelly

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    • Mikael C. Bergbrant is an Assistant Professor in the Department of Economics and Finance in The Peter J. Tobin College of Business at St. Johns University in New York City, NY. Patrick J. Kelly is an Associate Professor in the Department of Finance at the New Economic School in Moscow, Russia.


When examining the sources of risk associated with priced factors, the prior literature often uses macroeconomic realizations to proxy for changes in expectations. However, realizations can be biased, so instead we use changes in macroeconomic forecasts and macroeconomic news surprises. The sensitivity of common factors to macroeconomic risks is not robust, and generally economically and statistically insignificant. Sometimes the factors even hedge risk. Importantly, the weak relation between the factors and risks is not the result of low powered tests. These findings are inconsistent with the notion that the factors are priced because they proxy for the macroeconomic risks examined.