Following the introduction of the classic capm model, one finds that his harsh assumptions are far removed from the real world and that their usefulness and effectiveness are very limited. Subsequently, in the context of the constant questioning and recrimination of capm, a leading american scholar, ross, proposed a new, less-than-class capm premise and broader-scope asset pricing theory, arbitrage pricing (apt)。
The arbitrage pricing theory offers a more realistic premise than capm: investors are rational, risk-averse, they seek maximum effectiveness and share the same investment philosophy, and the market is complete (a little less realistic)。
Following the tradition of western economics pursuing the idea of market balance, the arbitrage pricing theory is also an asset pricing theory in a balanced state。
The underlying points of the arbitrage pricing theory are:
Under the single-price rule, if there are two assets in the market with the same level of risk, their gains should not be different. If the proceeds are different, arbitrage opportunities will arise in the market, with the result that the return on assets with the same risks will be consistent and the market balanced。
Soon, the arbitrage pricing theory was accepted by investors as an important asset pricing model. After careful analysis, one finds that the arbitrage pricing theory leads to a conclusion similar to that of the classic capm, which is in fact a continuum: the rate of return is a single factor, i. E., when assets are combined, the arbitrage pricing theory forms the same relationship as the classic capm。
Thus, in a sense, the arbitrage pricing theory can be considered as capm in a broad sense. The arbitrage pricing theory can also be used by investors as an alternative to understanding the balance between risk and yield in the market alone。
