Beta (finance) - Multiple Beta Model

Multiple Beta Model

The arbitrage pricing theory (APT) has multiple betas in its model. In contrast to the CAPM that has only one risk factor, namely the overall market, APT has multiple risk factors. Each risk factor has a corresponding beta indicating the responsiveness of the asset being priced to that risk factor.

Multiple-factor models contradict CAPM by claiming that some other factors can influence return, therefore one may find two stocks (or funds) with equal beta, but one may be a better investment.

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