I’m going through a question on portfolio management factor models and the answer states that investor sentiment and business cycle are macroeconomic factors.
Can someone gives some thoughts on that? I would have thought they are statistical factors and that gdp growth, inflation etc are more macroeconomic in nature.
Bumping this question up thanks all!
Investor Sentiment and Business Cycles both are direct inferences of the overall economy. Therefore, would be factors included an a macroeconomic factor model. Remember that, statisitcal factor models are rarely used in practice due to their obscure nature; they do not easily explain the data as would a macroeconomic or fundamental factor model.
And you are correct, gdp growth and inflation would also be included in macroeconomic factor models.
As well as unemployment, net exports, and so on.