It is not necessary to assume that asset returns are normally distributed. The Arbitrage Pricing Theory (APT) Model allows for different characteristics of return distributions to be captured by the factors in the model. The APT model also does not require the existence of a market portfolio that is mean-variance efficient. These assumptions are necessary for the Capital Asset Pricing Model (CAPM). The APT has three less restrictive assumptions:

1. Asset returns are explained by a k factor model.
2. No arbitrage opportunities exist for investors, because capital markets are perfectly competitive.
3. Investors can eliminate non-systematic or firm-specific risk through diversification.