In a microeconomic (or characteristic)-based risk factor model, the following factor would be one of many appropriate factors:
A) confidence risk.
B) maturity risk.
C) expected inflation risk.
D) call risk.
E) return difference between small capitalization and large capitalization stocks.

Question

Quizplus · Accepted Answer

The return difference between small capitalization and large capitalization stocks is a characteristic-based risk factor, meaning it reflects the attributes of individual securities or groups of securities rather than the macroeconomic environment. The other options listed are all macroeconomic risk factors, which may also be appropriate in a risk model, but not in a characteristic-based one.

In a Microeconomic (Or Characteristic)-Based Risk Factor Model, the Following