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FINANCIAL MARKET COURSES

Portfolio Theory – Arbitrage Pricing Theory (APT)

This course examines in detail the arbitrage pricing theory (APT) model, introduced by Stephen Ross in 1976 as a different equilibrium model that relaxes many of the assumptions of CAPM. The APT model does not depend on the need for an underlying market portfolio, instead operating on the key assumption that the returns on a security are generated by an identical process to that used by single- and multi-index models. Beginning by comparing the assumptions of the APT model with those of CAPM, this course describes how the arbitrage process works and examines the merits of APT as a capital asset pricing model.

  • OBJECTIVES

    On completion of this course, you will be able to:

    Compare the assumptions of the APT model with those of CAPM

    Describe how the arbitrage process works to ensure an equilibrium along the arbitrage pricing line

    Evaluate the merits of APT as a capital asset pricing model

  • COURSE OUTLINE

    Topic 1: APT Assumptions

    Topic 2: The APT Model

    The Arbitrage Pricinf Line

    Mis-priced Securities

    The Arbitrage Process

    Riskless Arbitrage

    Can the Arbitrage Pricing Line be Non-Linear?

    The Arbitrage Pricing Line

    Topic 3: An Appraisal of the APT Model

    APT Versus CAPM

    APT – Empirical Research

    IS APT Testable?

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    60 Minutes

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