An Advantage of the APT Over CAPM Is

question 38

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 A and B.
• E)All of the above

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