Hello!
Pasting from Schweser:
The expected values of the factors and random error in a amcroeconomic factor model equal zero --> the expected return for the stock equals the intercept.
Is that a given? Why do we learn to calculate it a few pages earlier then using the sensitivities and the factor surprises?
But of course! Devil is in the details!!!
Thank you, ceteris_paribus!
By the way: there’s no reason that macroeconomic factor values have to be surprises, but traditionally they are.
The reason macroeconomic factor values are typically surprises is that we assume that the market price of the asset has already accounted for the expected macroeconomic values.