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 these

Question

Quizplus · Accepted Answer

APT's use of several factors instead of a single market index to explain the risk-return relationship offers the greatest potential advantage over the CAPM. This allows for a more comprehensive and accurate assessment of risk and return, as opposed to relying solely on the performance of the overall market.

The Feature of the APT That Offers the Greatest Potential