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Sally Smith, FRM, is considering a switch in the theoretical basis of her risk model from a simple single-factor capital asset pricing model (CAPM) to a multi-factor arbitrage pricing theory (APT) model. To her manager, she claims the following differences between the two models. Each of her statements below is correct EXCEPT which is not?
A
Compared to only one specific factor (i.e., market index) in the simple CAPM, the APT model will be able to recognize multiple systematic risk factors.
B