Arbitrage Pricing Theory (APT) is a model proposed by Stephen Ross in 1976 for calculating returns on securities. It assumes multiple factors affecting security returns, differing from the Capital Asset Pricing Model (CAPM), which relies on a single systematic risk factor.
The Capital Asset Pricing Model (CAPM) is a sophisticated model that establishes a relationship between expected risk and expected return. It operates on the principle that investors require higher returns as compensation for higher risks.
The CAPM is a formula used to determine the expected return on an investment by accounting for both the risk-free rate of return and the risk premium.
The Capital Asset Pricing Model (CAPM) is a cornerstone of modern financial theory, providing a framework used to determine the expected return on an investment for a given level of risk.
