The most significant conceptual difference between the arbitrage pricing theory (APT) and the capital asset pricing model (CAPM) is that the CAPM ________.

A) places less emphasis on market risk
B) recognizes multiple unsystematic risk factors
C) recognizes only one systematic risk factor
D) recognizes multiple systematic risk factors

Arbitrage Pricing Theory

A financial model that determines the theoretical return of an asset by considering multiple macro-economic factors or theoretical market indices.

Systematic Risk Factors

External risks that affect an entire market or asset class, and cannot be mitigated through diversification.

CAPM

Capital Asset Pricing Model; a model that describes the relationship between risk and expected return and that is used in the pricing of risky securities.