An important conceptual difference between the arbitrage pricing theory (APT) and the capital asset pricing model (CAPM) is that the APT does not recognize market risk recognizes more than one unsystematic risk factors recognizes only one systematic risk factor recognizes more than one systematic risk factor none of the above Suppose the TRUE model of expected returns is the Fama French 3 factor model For a particular security, you calculate a non zero alpha using the CAPM index model Which of the following may be true You have discovered an arbitrage opportunity You have encountered an omitted factor problem A and B may both true A and B are both not true

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Question: An important conceptual difference between the arbitrage pricing theory (APT) and the capital asset pricing model (CAPM) is that the APT ______________. does not recognize

An important conceptual difference between the arbitrage pricing theory (APT) and the capital asset pricing model (CAPM) is that the APT ______________.

		does not recognize market risk
		recognizes more than one unsystematic risk factors
		recognizes only one systematic risk factor
		recognizes more than one systematic risk factor
		none of the above

Suppose the TRUE model of expected returns is the Fama French 3 factor model. For a particular security, you calculate a non-zero alpha using the CAPM index model. Which of the following may be true?

You have discovered an arbitrage opportunity.

You have encountered an omitted factor problem.

A and B may both true.

A and B are both not true.

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		You have discovered an arbitrage opportunity.
		You have encountered an omitted factor problem.
		A and B may both true.
		A and B are both not true.