Discuss the Similarities and the Differences Between the CAPM and the APT

question 79

Essay

Discuss the similarities and the differences between the CAPM and the APT with regard to the following factors: capital market equilibrium, assumptions about risk aversion, risk-return dominance, and the number of investors required to restore equilibrium.

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Definitions:

Uncertainty

The state of being uncertain; lack of certainty or predictability in outcomes or future events.

Certain Environment

Denotes a specific or particular setting or context in which something exists or operates.

Structured Environment

A work or organizational environment with clear rules, procedures, and expectations to guide behavior and operations.

Certainty

Certainty is the state of being completely confident or having no doubt about something.