1. Compare and contrast CAPM and APT
Although the chosen portfolio is different ,nevertheless the chosen combination of risky securities have same relative proportions. ... This is just like the Market Model except that there are K sources of influence. Each source of influence can be referred to as a risk factor. (1) (2) We can find the APM equation by Equilibrium condition (market clearing).that is to say there are no opportunities for arbitrage. If any asset is either over-priced or under-priced there is an opportunity for arbitrage (4) (1) ( 6 ) and it can be written as : ...
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