- CFA Exams
- CFA Level I Exam
- Topic 9. Portfolio Management
- Learning Module 40. Using Multifactor Models
- Subject 1. Arbitrage Pricing Theory
CFA Practice Question
Compared to CAPM, APT ______.
II. assumes investors are risk-averse
III. assumes a normal distribution of returns
IV. has fewer restrictive assumptions
I. allows more risk factors
II. assumes investors are risk-averse
III. assumes a normal distribution of returns
IV. has fewer restrictive assumptions
Correct Answer: I and IV
User Contributed Comments 3
| User | Comment |
|---|---|
| baller123 | APT allows more risk factors but it doesn't require them. Only one factor can be utilized if desired. |
| scottharris | The CAPM can be considered as a special case of the APT where there is only one risk factor, the market portfolio. |
| jimmyvo | oth capm and apt assume investors are risk-averse and normal distr. |