In a micro-economic (or characteristic) based risk factor model, which 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

In a micro-economic based risk factor model, factors that are specific to individual firms or assets are considered. The return difference between small and large capitalization stocks is a factor that captures differences in risk and return between these two types of stocks. Factors A-D are related to macro-economic risks that affect all assets and are not specific to individual firms or assets.

In a Micro-Economic (Or Characteristic) Based Risk Factor Model, Which