Macro disagreement and international stock markets

We examine the effect of macro disagreement on stock returns in an international context. Except for Italy, all G7 countries present a significant local disagreement beta effect, which is robust to size and value effects. In addition, the macro disagreement on the U.S. economy shows a strong spillover effect on all non-U.S. G7 countries. The degree of this spillover effect is largely and positively in line with the sequence of a country’s economic dependence on the U.S. For most non-U.S. G7 countries (except for Japan), the spillover effect is more pronounced or only significant when the U.S. is in periods of high economic uncertainty. Our paper demonstrates the pervasiveness of the disagreement beta effect and supports the leading role of the U.S. economy in the world.