CAPM vs$.$ APT

$1.$ CAPM does not assume there is an arbitrageur. Everyone has the same information.

$2.$ APT relies on a small group of "greedy" arbitrageurs, who chase alpha, to eliminate any mispricing. As a result, in equlibirum, APT and CAPM arrive at a similar conclusion for large diversfied portfolios: there is no alpha and asset returns are linearly related to the beta risk. In other words, the existence of arbitrageurs make the world look like it is informationally efficient.

$3.$ APT only works on a large diverified portfolio because arbitrageurs operate on such portfolios. They do not wish to work on indiviudal assets because indiviudal assets bring them additional firm level risk. In that case, their trading strategy will not be riskless because they cannot hedge out idiosyncratic risk. In other words, because of $(1)$ not able to hedging and $(2)$ not doing diverfication, individual stock investing is not a riskless arbitrage.

$4.$ CAPM applies to both individual firms and portfolios. Individual comanies often use the CAPM to do capital budgeting.

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