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Arbitrage Pricing Theory (APT) - Can it Enhance Valuation?

Equilest

JANUARY 3, 2023

The APT is a multi-factor model that seeks to explain the behavior of stock prices based on various economic and market conditions. Finance professionals and investors have widely used this theory as a powerful tool to predict stock prices and portfolio returns. First, we need to estimate the factor loadings for each risk factor.

Risk Premium 40
Risk Premium Risk-free Rate Market Risk Finance 40
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What is the Capital Asset Pricing Model (CAPM)?

Andrew Stolz

AUGUST 5, 2020

If an investor moves money from the risk-free asset into the stock market, they should expect to earn a return in excess of the risk-free rate, what is called an equity risk premium. Investments are exposed to two types of risk: systematic and unsystematic. What Impacts the Capital Asset Pricing Model?

Risk-free Rate 52
Risk-free Rate Beta Weighted Average Cost of Capital Risk Premium 52
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