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What is Understanding Arbitrage Pricing Theory about?
The Arbitrage Pricing Theory (APT) is an alternative asset pricing model to the Capital Asset Pricing Model (CAPM) that has fewer assumptions. The APT assumes asset returns are determined by multiple factors rather than just one market factor. Empirical tests of the APT aim to identify the factors that influence returns but there is no agreement on what all the factors should be. Both the APT and CAPM are risk-based models but the APT is more general by not requiring the assumption of a single efficient mar
- Author
- Mariya Filimonova
- Language
- EN