Question: answer this please How does arbitrage in the APT model work? I: Arbitrage is risk free in a diversified world. II: Arbitrage involves buying an

answer this please

  1. How does arbitrage in the APT model work?

    I: Arbitrage is risk free in a diversified world.

    II: Arbitrage involves buying an underpriced security and shorting an overpriced security, until the prices of both securities converge to fundamentals

    III: Arbitrageurs earn alpha with zero beta

    II, III

    II

    III

    I,II,III

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