Financial Risk Manager Part 2
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A group of newly hired analysts at a large pension fund are discussing how changes in different macroeconomic risk factors are likely to impact the fixed-income and equity positions in the fund's portfolios. The analysts consider the effects of some of the most commonly modeled macroeconomic risk factors, including economic growth, inflation, and volatility, on different classes of stocks and bonds. Which of the following observations is correct for the analysts to make?
A
Government bonds tend to generate lower returns during recessionary periods than during expansionary periods.
B
Corporate bonds tend to be less volatile during periods of high real gross domestic product (GDP) growth than during periods of low real GDP growth.
C
Large-capitalization stocks tend to generate higher returns during periods of high inflation than during periods of low inflation.
D
Small-capitalization stocks tend to be more volatile during periods of high consumption growth than during periods of low consumption growth.