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FACTORS

It may be emphasised here that the APT framework normally includes the market risk premium (return on the market portfolio minus risk free rate) as one of the factors; it may be recapitulated that market risk premium is the sole factor used in the CAPM. The other factors included are macroeconomic and firm specific, while the major macroeconomic factors are inflation, interest rates, growth rate in gross domestic product, GDP/general economic conditions, the firm specific factors include strikes, availability or otherwise or raw materials, competition, unique regulations (say increase in the custom duty on the raw materials imported), and 50 on.

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