In reading 31 (return concepts) the macroeconomic multifactor model is given as: required return = risk free + (sensitivity1 * factor 1) + (sensitivity2 * factor 2) In reading 57 (portfolio concepts) the macroeconomic multifactor model is given as: return for asset = expected return for asset + (sensitivity1 * surprise1) + (sensitivity 2* surprise2) Why does 1 use risk free as the intercept and the other use expected return as the intercept?

In reading 31, thatâ€™s a macroeconomic model, not a factor model.

Reading 31 says it is a macroeconomic **multifactor** model

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Any explanation on why 1 uses risk free rate for intercept and the other uses expected return?

In the absence of any surprises, the return of the asset should be equal to its expected return. Or, if there are no surprises, then everything is as expected and the return is the expected return.

In the first model you use risk free rate as you are using several factors to calculate the return, instead of using surprises.

But they are both macroeconomic models that use several factors, so not sure the difference in using expected return and risk free for the other?

Any help on this would be great?