corporate Finance

An important difference between CAPM and APT is CAPM depends on risk-return dominance; APT depends on a no arbitrage condition. CAPM assumes many small changes are required to bring the market back to equilibrium; APT assumes a few large changes are required to bring the market back to equilibrium. CAPM depends on risk-return dominance; APT depends on a no arbitrage condition and assumes many small changes are required to bring the market back to equilibrium. implications for prices derived from CAPM arguments are stronger than prices derived from APT arguments