Arbitrage Pricing Theory

Definition

APT. An alternative asset pricing model to the Capital Asset Pricing Model. Unlike the Capital Asset Pricing Model, which specifies returns as a linear function of only systematic risk, Arbitrage Pricing Theory may specify returns as a linear function of more than a single factor.

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You may want to see if using an arbitrage pricing theory may make things more profitable for your product line.

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I helped figure out what the arbitrage pricing theory would do and I thought I was smart for taking it seriously.

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The Arbitrage Pricing Theory did not make sense to Felix and he preferred the straightforward accounting of the Capital Asset Pricing Model.

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Stephen Ross APT