One of the main problems with the arbitrage pricing theory is ________.
A) its use of several factors instead of a single market index to explain the risk-return relationship
B) the introduction of nonsystematic risk as a key factor in the risk-return relationship
C) that the APT requires an even larger number of unrealistic assumptions than does the CAPM
D) the model fails to identify the key macroeconomic variables in the risk-return relationship

Question

Quizplus · Accepted Answer

The arbitrage pricing theory (APT) does not specify which macroeconomic factors should be used, making it difficult to identify the key variables affecting the risk-return relationship.

One of the Main Problems with the Arbitrage Pricing Theory