Insights on the global macro-finance interface: Structural sources of risk factor fluctuations and the cross-section of expected stock returns

This study contributes to the investigation of the macro-finance interface by assessing the economic content and risk-based interpretation of widely employed risk factors in the specification of empirical asset pricing models, i.e., Fama-French size and value, Carhart momentum, as well as the more recent Pastor-Stambaugh liquidity and Adrian-Etula-Muir leverage factors. Strong support for their risk-based interpretation, encompassing evidence on cause, persistence and direction of the size, value and momentum effects, and new insights on the specification of systematic risk, are provided.