We test whether the profitability of HML, SMB, and WML can be linked to fut
ure Gross Domestic Product (GDP) growth. Using data from ten countries, we
find that HML and SMB contain significant information about future GDP grow
th. This information is to a large degree independent of that in the market
factor. Even in the presence of popular business cycle variables, HML and
SMB retain their ability to predict future economic growth in some countrie
s. Our results support a risk-based explanation for the performance of HML
and SMB. Little evidence is found to support such an explanation in the cas
e of WML. (C) 2000 Elsevier Science S.A. All rights reserved. JEL classific
ation: G11; G12; G15.