Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
When two investors agree to disagree on market prospects and bet against each other, both expect to profit from their trades. Hence, an increase in disagreement leads to higher perceived trading profits and lower marginal utilities for both investors, so disagreement betas can affect cross-sectional asset returns. We construct a disagreement measure using professional forecasts of U.S. macroeconomic fundamentals. Betas with respect to this disagreement factor positively explain cross-sectional returns of stocks, corporate bonds, mortgage-backed securities, and government securities. Further tests using portfolio-based test assets confirm the significant pricing power of the disagreement factor on top of influential benchmark factors.