Unlike the Capital Asset Pricing Model, the Arbitrage Pricing Theory

question 77

Multiple Choice

Unlike the capital asset pricing model, the arbitrage pricing theory requires only the following assumption(s) :

• A) a quadratic utility function.
• B) normally distributed returns.
• C) the stochastic process generating asset returns can be represented by a factor model.
• D) a mean-variance efficient market portfolio consisting of all risky assets.
• E) capital markets are imperfectly competitive.

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