Which statement best distinguishes macro factors from micro factors in investment performance?

• A. Macro factors include GDP, inflation, interest rates, and fiscal policy; micro factors include company fundamentals, earnings, competitive position, and management quality.
• B. Macro factors include company fundamentals and earnings; micro factors include GDP and inflation.
• C. Macro factors include only taxes; micro factors include inflation.
• D. Macro factors include liquidity measures; micro factors include governance.

Answer: (A)

Macro factors are broad, economy-wide conditions that affect many investments at once, while micro factors are the specific fundamentals of a single company. The statement is correct because macro factors include GDP, inflation, interest rates, and fiscal policy—the big-picture influences on markets. Micro factors, on the other hand, are about the individual business—fundamentals like earnings, competitive position, and management quality. The other options mix up the scope or misclassify items (for example, treating company fundamentals as macro factors or limiting macro factors to taxes), which would not reflect how market-wide conditions versus company-specific fundamentals drive investment performance. In practice, macro factors set the environment, while micro factors define a company's intrinsic value within that environment.