Can someone please explain the differences in intercept given the below are both macroeconomic multifactor models? Macreconomic multifactor model in ch31: required ret. = risk free + (sensitivity1 * factor1) Macroeconomic multifactor model in ch57: required ret. = expected return + (sensitivity1 * suprise1)
One is for exposure to the entire factor, the other is for exposure to the suprise in the factor.
But why isn’t exposure the same?