1) Critically relate Capital Asset Pricing Theory and Arbitrage Pricing Theory.
2) CAPM was estimated for some period in the market. The actual return of two portfolios is given below:
Portfolio A: Actual Return = 14% Beta =0.8
Portfolio B: Actual Return =20% Beta = 1.2
The equation of CAPM is Ri = .07 + 0.10 ?i
What can be said about the portfolio’s performance?