Understanding Arbitrage Pricing Theory (APT) 📈

The #arbitrage #pricing #theory (APT) improves upon the #capital #asset pricing (CAPM) model. Instead of assuming there is #oneandonly #one "#market" #exposure that determines asset #returns the APT assumes there are an unspecified number of #macroeconomic #factors that do so. Exposure to these factors are represented by factor betas. These macroeconomic factors could be measures such as #gdpgrowth, #inflation, #goldprices and #equitymarkets. The APT pricing model appears to better #reflect #reality than the CAPM. #investing #markets #investments #cfainstitute #caia #frm #finance

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