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General equilibrium models of asset pricing allow us todetermine the relevant measure of risk for any asset and therelationship between expected return and risk.Two of these models have been subject to fierce debate amongpractitioners and academics, The Capital Asset Pricing Model (CAPM)and The Arbitrage Pricing Model (APT). Based on the assumptions andtests of each model you are asked to:1. Critically analyse the assumptions of both models.2. Discuss the similarities and differences between them.3. If you are a portfolio manager and had to choose one of themodels, which one would you pick up and why?In the analysis, students are advised to look into issues suchas:a. The ability of each model to explain systematic risk.b. Usefulness in predicting excess expected returns.c. Ability of each model on building up a well-diversifiedportfolio.d. Main empirical findings related to the models.