I'm smart - I understand the math, and I know they are both about measuring and predicting how well a stock follows the main market - but I also know I'm missing something basic, especially about CAPM. Can someone please recommend a website or an article that would help?
2006-11-03 07:43:38 · 1 answers · asked by sunnskye 1 in Business & Finance ➔ Investing
CAPM is basically a two factor model - considering only the risk free interest rate and beta. The risk free rate is the return investor will get for holding the security over a period of time, while beta will determine the return for taking the risk.
For more clarity refer to this link: http://www.investopedia.com/terms/c/capm.asp
APT on the other hand is not limited to the number of factors. You can build in as many factors in the model you want. See for example, Fama and French Three Factor Model.
2006-11-03 22:09:24 · answer #1 · answered by Husain C 1 · 0⤊ 0⤋