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In the CAPM, all of an investments exposure to market risk is captured in one...

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Finance

In the CAPM, all of an investments exposure to market risk is captured in one number: the beta. In the APM and the multifactor models, you allow for multiple sources of market risk and estimate an investments risk exposure with betas against each market risk factor. Though the latter are better models, insofar as they give your more flexibility, they have never acquired a following in corporate finance. Why is that?

a.

None of the above

b.

It is impossible to estimate the multiple betas in the APM and multifactor models.

c.

The CAPM does at least as good a job as the APM and multifactor models in forecasting future returns, and it is more intuitive and less work.

d.

The CAPM works so well that you do not need other models

e.

The CAPM does a better job of explaining past returns than the APM and multifactor models

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