Arbitrage Pricing Theory (APT)

Definition:

An alternative model to the capital asset pricing model developed by Stephen Ross and based purely on arbitrage arguments. The APT implies that there are multiple risk factors that need to be taken into account when calculating risk-adjusted performance or alpha.

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Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

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Cross-Sectional Ratio Analysis

A method of analysis that compares a firm's ratios with some chosen industry benchmark. The benchmark usually chosen is the average ratio value for all firms in an industry for the time period under... Read More

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