A model of stock prices that allows for more sources of risk than just the stock market's excess return is the ________ theory.

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The theory that allows for more sources of risk than just the stock market's excess return is the Arbitrage Pricing Theory (APT). The APT suggests that multiple macroeconomic factors can affect stock prices, not just the stock market's excess return. The excess-return theory is more focused on the relationship between a stock's expected return and its market return. The random-walk theory suggests that stock prices follow a random pattern and cannot be predicted. The idiosyncratic risk refers to the risk that a specific stock faces due to factors specific to that company, such as management decisions or industry-specific factors.

A Model of Stock Prices That Allows for More Sources