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What is APT Study Notes about?

Arbitrage Pricing Theory (APT) is a multi-factor asset pricing model that predicts expected returns based on macroeconomic variables and is less restrictive than the Capital Asset Pricing Model (CAPM). APT operates under the Law of One Price, allowing for arbitrage opportunities when identical assets are mispriced. The model describes expected returns as a linear function of exposures to various risk factors, with key concepts including well-diversified portfolios and the derivation of risk premiums.

Author

arun.prof.commerce

Language

EN