Arbitrage pricing theory (APT) is a multi-factor asset pricing model based. It's based on the idea that an asset's returns can be predicted using the linear relationship between th… See more

E(R)i=E(R)z+(E(I)−E(R… See more

The arbitrage pricing theory was developed by the economist Stephen Ross in 1976, as an alternative to the capital asset pricing model (CAPM). Unlike the CAPM, which assume ma… See more

While APT is more flexible than the CAPM, it is more complex. The CAPM only takes into account one factor—market risk—while the APT formula has multiple factors. And it takes a con… See more