The APT differs from the CAPM because the APT
A) places more emphasis on market risk.
B) minimizes the importance of diversification.
C) recognizes multiple unsystematic risk factors.
D) recognizes multiple systematic risk factors.

Question

Quizplus · Accepted Answer

The Arbitrage Pricing Theory (APT) differs from the Capital Asset Pricing Model (CAPM) by recognizing multiple systematic risk factors, rather than focusing on a single market risk factor as the CAPM does.

The APT Differs from the CAPM Because the APT