CAPM - Single Factor Model APT - Multi Factor Let the faceoff begin!
HADOUKEN
err i mean CAPM assumes security returns follow a normal distribution APT does not CAPM assumes investors have quadratic utility functions APT does not
CAPM needs the market portfolio, APT does not.
The CAPM is a single-factor asset pricing model, in which only risk relative to the broad market is priced. The CAPM suggests that all investors should hold some combination of the market portfolio and the risk-free asset. APT captures multiple dimensions of risk besides the overall market risk, and suggests that investors make decisions relative to multiple sources of risk. Cyclical plays too. APT has less assumptions than CAPM Both assume; efficient markets assets properly priced per risk arbs take away the free lunch
The CAPM is a special case of the APT. Displaying a normal distribution or a single factor are not violations of the APT.