What is capital asset pricing model and arbitrage pricing theory? Diff

Question

What is capital asset pricing model and arbitrage pricing theory? Differentiate between them.

18 Mar 2025

Answer :

Word Count : 569

The Capital Asset Pricing Model (CAPM) and the Arbitrage Pricing Theory (APT) are two fundamental models in financial management used to determine the expected return on assets based on risk factors. Both theories attempt to explain the relationship between risk and return but differ in their assumptions, structure, and approach.

### Capital Asset Pricing Model (CAPM)
The CAPM, developed by William Sharpe, is a single-factor model that describes the relationship between systematic risk and expected return for assets, particularly stocks. It is based on the Modern Portfolio Theory (MPT) and assumes that investors hold diversified portfolios, eliminating unsystematic risk.

The CAPM formula is given by:
\[
___ ____ ___ __________ _____ _____ __________ ________ ___ ___ ________ _______.
__________ __________ ______ _______ ________ ________ _____ ____.
_____ ______ ______ ________ _______ _________ ___ ________ __________ __________.
___ ____ ________ ________ _____ ________ _______ ________ _____ ______.
___ ______ ________ ______ ____ ______ _______ ____ _____ ________.
_________ ___ _______ ____ __________ ___.
____ _______ _____ __________ __________ ________ ______ ________ ______ __________ ____ ___.
______ _________ ____ ____ __________.
_____ _______ ______ _____ ___.
______ ________ __________ ____ __________ _________ ________ ______ _______ ____ ___.
_______ ___ ______ ______ _________ _______ _______ ________ _____ ______ _____.
__________ _______ ________ _________ _______ ___ _____ _________ ______ __________ _________ _____.
________ ________ ________ _____ ___ ____ ___ _______ ____ _________.
_____ _______ __________ ___ ________ _________ ______ __________ ____ _________ ____.
______ _____ _________ _______ ____ ____ ___ ________ _____.
______ _____ ________ ______ ______ ___ _______ ______.
__________ _____ __________ __________ ____.
____ __________ ________ ___ ______.
_____ ________ ___ ______ _____ ____ _______ __________ ____.
_____ __________ _______ _____ ____ ____ ___ ______ _______ ________ ___.
___ _________ __________ _________ ________ ______ ___ ___ _______ ______ ___.
__________ _________ _______ ________ ________ ______ ________ __________ ___ _________ __________.
_____ __________ __________ ____ __________ _______ _______.
_______ _______ ____ ________ ___ ________ ___ ___ _______.
__________ _______ ________ _______ ______ __________ ____ ________ __________ ___ _________.
____ _________ _______ ______ _________ __________ __________ __________ _______ _____ __________ ___.
___ _____ ______ ________ ________ ____ ________.
_______ ___ ________ __________ ____ _____ ___ _______ __________ _____ ___ ______.
__________ ______ ____ __________ _______ _____ ___ ___.
__________ _________ __________ ___ __________ _________ ______ ____ ______ ________ _____ ___.
__________ _________ ______ _______ _______ ___ __________ _____ ________ ____ ________ _______.
_________ _____ ________ __________ _______ ______.
____ __________ _____ ____ ________ ___ _____ ___ ____ _________ ________.
________ ______ _________ __________ ______ ___ _________ ________ ____.
_________ _______ ________ ___ ___ ______ _________ ________ _________ _____.
_____ _______ _________ _______ __________ ___ ________ ________.
_______ ________ ___ ____ ___ ________ ______ _________ ___.
____ ________ __________ ___ _____ ____ _______ ________ ___ _____ ______.
_______ ___ _____ _________ __________.
___ __________ ____ __________ __________.
_______ ____ _________ _______ ________ _________ _____ _____ ________ ___.
________ _________ _________ _____ ________ _________.
_________ ____ __________ ______ ____ _______ ________ ____ _______.
___ ___ __________ _______ ____ _______ _________ __________ ___ _______ _________.
_____ ___ _______ __________ ____ ____ ______ ____ ____ __________ ______.
_____ ________ _____ ____ ___ _____ ________ __________.
_________ ___ _____ __________ _______ _____ _______ ____ _______ __________.
_________ __________ ___ ___ ________ _____.
______ _________ ________ __________ ______ __________ ___.
____ __________ ________ ______ _____ __________ ___ ____ _____.
_________ _________ ____.
Get Full Answer on WhatsApp

IGNOU Solved Assignments Assignments Ignou Projects Project Previous Year Solved Exam Papers Notes Notes Sample Question Papers Sample Question Papers

IGNOU NEWS

Assignment Submission Last Date Extended Till 30 June 2026 Click Here★★★IGNOU June 2026 TEE Date Sheet Released Click Here★★★