Finance Question

What advantage of Capital Asset Pricing Model (CAPM) for find require rates of return & the disadvantage of Arbitrage Pricing Theory (APT)?

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  • 1 十年前
    最愛解答

    Advantage of Capital Asset Pricing Model (CAPM)

    1 It is simple and sensible:

    • is built on modern portfolio theory

    • distinguishes systematic risk and non-systematic risk

    • provides a simple pricing model.

    2 It is relatively easy to implement.

    Disadvantage of Arbitrage Pricing Theory (APT)

    1 Model itself does not say what the right factors are.

    2 Factors can change over time.

    3 Estimating multi-factor models requires more data.

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