Both the APT and the CAPM imply a positive relationship between expected return and risk.The APT views risk:
A)very similarly to the CAPM via the beta of the security.
B)in terms of individual intersecurity correlation versus the beta of the CAPM.
C)via the industry wide or marketwide factors creating correlation between securities.
D)the standardized deviation of the covariance.
E)None of the above.

Question

Quizplus · Accepted Answer

The APT views risk as being created by industry wide or marketwide factors that create correlation between securities, rather than just relying on the individual security's beta as the CAPM does.

Both the APT and the CAPM Imply a Positive Relationship