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Arbitrage Pricing Theory Quiz (Risk, Portfolio, Factor)

_______ a relationship between expected return and risk.

Which pricing model provides no guidance concerning the determination of the risk premium on factor portfolios?

An arbitrage opportunity exists if an investor can construct a ______investment portfolio that will yield a sure profit.

The APT was developed in 1976 by _______.

A _______ portfolio is a well-diversified portfolio constructed to have a beta of 1 on one of the factors and a beta of 0 on any other factor.

The exploitation of security mispricing in such a way that risk-free economic profits may be earned is called ___________.

An investor will take as large a position as possible when an equilibrium price relationship is violated. This is an example of _________.

The APT differs from the CAPM because the APT _________.

In terms of the risk/return relationship

The following factors might affect stock returns

Tagged as: factor
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