An Important Difference Between CAPM and APT Is

question 66

Multiple Choice

An important difference between CAPM and APT is

• A) CAPM depends on risk-return dominance; APT depends on a no-arbitrage condition.
• B) CAPM assumes many small changes are required to bring the market back to equilibrium; APT assumes a few large changes are required to bring the market back to equilibrium.
• C) implications for prices derived from CAPM arguments are stronger than prices derived from APT arguments.
• D) Both CAPM depends on risk-return dominance; APT depends on a no-arbitrage condition and CAPM assumes many small changes are required to bring the market back to equilibrium; APT assumes a few large changes are required to bring the market back to equilibrium.
• E) All of the options are true.

---

Definitions:

Public Policy

Government actions, which could be laws, regulatory measures, courses of action, and funding priorities, regarding various issues implemented by the government.

Unemployment Insurance

A public scheme offering monetary help to people unemployed due to reasons beyond their control.

Economy

The system by which goods and services are produced, distributed, and consumed in a society.

Unemployment Insurance

A government-managed program that provides financial assistance to individuals who have lost their jobs through no fault of their own, to support them while they search for new employment.