We provide a novel priced Wold representation that, using the pricing restrictions of a large cross-section of asset returns, sharply identifies shocks common to financial markets and the macroeconomy, and their propagation. These shocks slowly propagate through major macro aggregates, account for 20 - 47% of their variation and most of their predictability, and trace their business cycle, disciplining all equilibrium models. This propagation, not the overall persistence of macro quantities, yields short-run macro risk premia that are negligible, yet match the equity premium at business cycle horizons. Validating the method, the model-implied prices of dividend strips match observed out-of-sample forward equity yields and their term structure, both conditionally and unconditionally. By identification through elimination, we rule out productivity, investment-specific technology, and pure preference shocks as likely origins of the business cycle. The data point to demand/belief shocks and cost-push shocks propagating through real, nominal, and informational rigidities.
