The feature of the APT that offers the greatest potential advantage over the CAPM is the A) use of several factors instead of a single market index to explain the risk-return relationship. B) identification of anticipated changes in production, inflation, and term structure as key factors in explaining the risk-return relationship. C) superior measurement of the risk-free rate of return over historical time periods. D) variability of coefficients of sensitivity to the APT factors for a given asset over time. E) None of the options are correct.

Question

Quizplus · Accepted Answer

The advantage of the APT is the use of multiple factors, rather than a single market index, to explain the risk-return relationship. However, APT does not identify the specific factors.

The Feature of the APT That Offers the Greatest