How does arbitrage in the APT model work? I: Arbitrage is risk free in a...
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Accounting
How does arbitrage in the APT model work?
I: Arbitrage is risk free in a diversified world.
II: Arbitrage involves buying an underpriced security and shorting an overpriced security, until the prices of both securities converge to fundamentals
III: Arbitrageurs earn alpha with zero beta
II, III
II
III
I,II,III
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