Yes. The quantity of risk underlying cross-sectional return spreads is time-varying, yielding swings in factors’ risk premia. We define “macro-relevant” factors as those whose risk premium variation induce consumption fluctuations, and more broadly, a business-cycle. While most factors documented in the literature are vetted in this manner, a handful of factors’ risk matter for economic growth, above and beyond changes in market risk. We cluster macro-relevant factors based on their impact in frequency domains. Macro-relevant factors mostly relate to profitability, organization capital, financial conditions, or inventory. Interestingly, many factors’ risk premia are associated with expansions, unlike the market risk premium.
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