An Advantage of the APT Over CAPM Is

question 37

Multiple Choice

An advantage of the APT over CAPM is:

• A) APT can handle multiple factors.
• B) if the factors can be properly identified, the APT may have more explanation/predictive power for returns.
• C) the APT forces unsystematic risk to be negative to offset systematic risk; thus making the total portfolio risk free, allowing for an arbitrage opportunity for the astute investor.
• D) Both APT can handle multiple factors; and if the factors can be properly identified, the APT may have more explanation/predictive power for returns.
• E) All of

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Definitions:

Marx

Refers to Karl Marx, emphasizing his contributions to political theory and his critique of the structural aspects of society.

Modernization

The process through which societies experience industrialization, urbanization, and cultural and technological innovations, impacting social and economic structures.

Fossil Fuels

Natural fuels such as coal, oil, and natural gas, formed from the ancient remains of organisms and typically used for energy.

Renewable Resource

Natural resources that can be replenished naturally with the passage of time, such as sunlight, wind, and biomass.