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Portfolio Management
Reading 37
Using Multifactor Models
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LOS 37.a
Which statement about arbitrage pricing theory (APT) is most accurate?
A
APT requires that one of the risk factors be the market portfolio and specifies the number of factors.
B
APT assumes unsystematic risk can be diversified away and no arbitrage opportunities exist, but does not specify the risk factors.
C
APT is a single-factor model that is a special case of the CAPM.
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