Advantage(s) of the APT is(are) that the model provides specific guidance concer

Question

Advantage(s) of the APT is(are) that the model provides specific guidance concerning the determination of the risk premiums on the factor portfolios. that the model does not require a specific benchmark market portfolio. that risk need not be considered. that the model provides specific guidance concerning the determination of the risk premiums on the factor portfolios and that the model does not require a specific benchmark market portfolio. that the model does not require a specific benchmark market portfolio and that risk need not be considered.

Explanation / Answer

The correct answer is

B) that the model does not require a specific benchmark market portfolio

The Arbitrage Guidance Theory ( APT) provides no guidance concerning the detemination of the risk premium on the factor portfolios. Risk must be considered in the APT.

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