The ____________ provides an unequivocal statement on the expected return-beta relationship for all assets, whereas the _____________ implies that this relationship holds for all but perhaps a small number of securities.
A) APT; CAPM
B) APT; OPM
C) CAPM; APT
D) CAPM; OPM

Question

Quizplus · Accepted Answer

The Capital Asset Pricing Model (CAPM) provides a clear expected return-beta relationship for all assets, assuming a linear relationship between the expected return of an asset and its beta. The Arbitrage Pricing Theory (APT), on the other hand, suggests this relationship holds for most but potentially not all securities, as it allows for multiple factors to influence returns, not just market risk.

The ____________ Provides an Unequivocal Statement on the Expected Return-Beta