The APT differs from the CAPM because the APT _________.
A)places more emphasis on market risk
B)minimizes the importance of diversification
C)recognizes multiple unsystematic risk factors
D)recognizes multiple systematic risk factors
E)none of the above

Question

Quizplus · Accepted Answer

The APT recognizes multiple systematic risk factors, whereas the CAPM focuses solely on market risk. Additionally, the APT recognizes multiple unsystematic risk factors, making option C partially correct but not the best choice. Option B is incorrect, as diversification is still important under the APT framework. Option A is incorrect because it mischaracterizes the differences between the APT and the CAPM.

The APT Differs from the CAPM Because the APT _________