APT vs Fundamental models

CFA Level II Portfolio Management
#1

Hi Guys,

Is it correct ot say that the APT is a fundamental model? Or is it a macroecomomic model?

Thanks

#2

Neither! Statistical :wink:

#3

One of the assumption underlying the APT is that the returns can be derived from the multifactor model. It doesn’t say clearly which model can be used. So I think the APT could be any of the 3 categories of the multifactor model.

HOPE anyone will confirm my view!

#4

Thanks both CMLSML and Massimo!

Hummmmmm… not sure this has cleared this up.

My understanding is that the APT;

  1. is a cross-sectional equilibrium model (which supports CMLSML’s comment that its a stat model);

  2. the APT produces the E® of a stock which then is plugged into the Multifactor model as the intercept. This point indicates to me that the APT is a Fundamental Factor model.

Anyone else got a view on this??

Thanks