- CFA Exams
- CFA Level I Exam
- Topic 9. Portfolio Management
- Learning Module 37. Economics and Investment Markets
- Subject 5. Equities and the Equity Risk Premium
CFA Practice Question
Investors demand a higher risk premium on small- relative to large- stocks. This premium is expected to ______ in recessions.
B. stay the same
C. fall
A. rise
B. stay the same
C. fall
Correct Answer: A
The premium is expected to fall when the underlying economy is strong.
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