Which of the Below Reasons Is NOT a Reason an APT

question 2

Multiple Choice

Which of the below reasons is NOT a reason an APT advocate would offer in support of the APT over either the CAPM or the multifactor CAPM?

• A) The APT makes less restrictive assumptions about investor preferences toward risk and return.
• B) The APT assumes that the investors trade off between risk and return depends solely on the basis of the expected returns and standard deviations of prospective investments.
• C) The APT does not rely on identifying the true market index, the theory is potentially testable.
• D) The APT makes no assumptions are made about the distribution of security returns.

---

Definitions:

Canalized

A term referring to the limitation of the expression of genetic variability due to genetic or environmental influences, resulting in a trait that is shaped to follow a predictable pattern regardless of variations.

Genetic-Environment Correlations

The interaction between an individual's genetic makeup and their surrounding environment, influencing traits and behaviors.

Passive Correlation

A concept in behavioral genetics where an individual's traits result indirectly from the environment provided by their biological parents.

Active Correlation

A concept in genetics suggesting that an individual’s genes encourage them to seek out environments that complement their inherited traits.