
Quiz 3 - APT
Quiz by Jamal Haider Naqvi
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. The APT does not require a market portfolio
Neither firm size nor the time interval used is important when computing beta.
The APT assumes that security returns are normally distributed.
In the APT model, the identity of all the factors is known.
The January Effect is anomaly in that returns in January are significantly smaller than in any other month.
Consider the following two factor APT model (click picture):

In the APT model the idea of riskless arbitrage is to assemble a portfolio that