What do cross-sectional models aim to explain?

Cross-sectional models are specifically designed to analyze and explain the variation in performance differences among a group of assets at a particular point in time. Rather than focusing on the time-series aspect of asset performance, which looks at how an asset's performance changes over time, cross-sectional models provide insights into why certain assets outperform or underperform relative to others within a defined timeframe.

By focusing on the differences between assets, these models often utilize various characteristics that differentiate one asset from another, such as fundamentals, risk factors, or market conditions at that specific time. This approach can be invaluable for investors and analysts keen on understanding how certain attributes or circumstances contribute to the relative performance of assets.

In contrast, models that analyze performance over time typically fall into the time-series category, which investigates trends, patterns, and the effects of changes over temporal intervals. Evaluating risk assessment of individual assets or the influence of macroeconomic factors tends to involve different analytical frameworks not strictly aligned with the cross-sectional model's focus on comparative performance at a single point. Thus, option B accurately captures the essence of cross-sectional models in the context of asset performance assessment.