The below are risk factors discussed in the readings on Asset Allocation (alternative). They all make sense intuitively, except for 2 of them (Size & Value). Size risk factor is “excess return of small-cap equities over large cap equities”. I just don’t understand intuitively how that is a “risk factor” ? How is a subset of an asset class a risk factor?
AA Risk Factors
Equity market return
size
value
liquidity
duration
inflation
credit spread
currency