Which assumption is required by both the CAPM and the APT? A. There are no transaction costs. B. Asset prices are not discounted for unsystematic risk. C. All investors have the same return expectations.
The assumptions that all investors have the same expectations and that there are no transaction costs are specific to CAPM, not APT. However, both models assume that unsystematic risk can be diversified away, and has a risk premium of zero
