According to the arbitrage pricing theory, the return on a stock
A)is not related to the expected return on the stock
B)depends on the stock's responsiveness to unexpected changes
C)is reduced through the construction of diversified portfolios
D)equals the market return if the expected rate of inflation is realized

Question

Quizplus · Accepted Answer

The arbitrage pricing theory (APT) posits that the return on a stock is influenced by its sensitivity to various macroeconomic factors, meaning it depends on the stock's responsiveness to unexpected changes in these factors.

According to the Arbitrage Pricing Theory, the Return on a Stock