Confidence Risk exposure reflects a stock's sensitivity to unexpected changes in investor confidence. Investors always demand a higher return for making relatively riskier investments. When their confidence is high, they are willing to accept a smaller reward than when their confidence is low. Most assets have a positive exposure to Confidence Risk. An unexpected increase in investor confidence will put more investors in the market for these stocks, increasing their price and producing a positive return for those who already held them. Similarly, a drop in investor confidence leads to a drop in the value of these investments. Some stocks have a negative exposure to the Confidence Risk factor, however, suggesting that investors tend to treat them as a "safe haven" when their confidence is shaken.

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