Given: inflation is a priced risk factor. You observe the following for two different type of stocks:

A stocks: tend to perform well when inflation surprises on the upside and perform poorly when inflation surprises on the downside

Type B stocks: tend to perform poorly when inflation surprises on the upside and perform well when inflation surprises on the downside

A stocks have lower expected returns than type B stocks.

A and B stocks have the same factor loadings on all other possible factors.

Which of the following statements is most likely true?

1. There is a negative inflation risk premium
2. There is a positive inflation risk premium
3. A stocks have a negative factor loading on the inflation factor
4. None of the above