##  [Arbitrage Pricing Theory](/index.php/arbitrage-pricing-theory) 

  ##  [Arbitrage Pricing Theory](https://social.quantumdictionary.io/arbitrage-pricing-theory-0) 

  

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**Social Sciences Dictionary**

 







 

 

 

 



 

 

 

 

Definition

A multifactor linear asset‑pricing framework asserting that, under absence of arbitrage and given a set of pervasive systematic factors, the expected excess return of a well‑diversified asset is approximately a linear function of its factor loadings: E[R_i] − R_f ≈ Σ_k β_{ik}·λ_k, where β_{ik} are sensitivities to common factors and λ_k are the associated factor risk premia; the theory specifies t