C IS CORRECT. APT EXPLAINS AN ASSET’S RETURN BASED ON FACTORS REPRE...

1. - CFA 2018 LEVEL 2 PORTFORLIO QUESTION BANK R48 INTRODUCTION TO MULTIFACTOR MODELS Q BANK
CFA 2018 LEVEL 2 PORTFORLIO QUESTION BANK R48 INTRODUCTION TO MULTIFACTOR MODELS Q BANK

1. C is correct. APT explains an asset’s return based on factors representing systematic risk

only. It assumes that asset specific risk can be diversified away. Section 3. LO.a.