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)as the standardized deviation of the covariance.
E)None of the above.

Question

Quizplus · Accepted Answer

The APT views risk as the industry wide or marketwide factors that create correlation between securities. It does not rely on the beta of a single security like the CAPM, nor does it consider individual intersecurity correlation or the standardized deviation of the covariance.

Both the APT and the CAPM Imply a Positive Relationship