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.

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Definitions:

Ethnomethodological

Related to ethnomethodology, a sociological perspective that focuses on the ways people make sense of their everyday life.

Conversations

Interactive forms of communication where two or more people exchange ideas, thoughts, or feelings through spoken or written words.

Casual Settings

Environments or scenarios characterized by informal interactions, often spontaneous and with minimal structural constraints.

Ethnomethodological

Pertaining to an approach within sociology that studies the methods people use to understand and produce the social order in everyday life.