Asked by Kimmy Mendivel on Apr 28, 2024
Verified
Provide a definition for arbitrage pricing theory (APT).
Arbitrage Pricing Theory (APT)
An equilibrium asset pricing theory that is derived from a factor model by using diversification and arbitrage. It shows that the expected return on any risky asset is a linear combination of various factors.
- Acquire knowledge about the Capital Asset Pricing Model (CAPM) and its integral parts.
Verified Answer
MR
Marco Ruiz TrellesMay 01, 2024
Final Answer :
An equilibrium asset pricing theory that is derived from a factor model by using diversification and arbitrage. It shows that the expected return on any risky asset is a linear combination of various factors.
Learning Objectives
- Acquire knowledge about the Capital Asset Pricing Model (CAPM) and its integral parts.