APT and market model economic, relevant, meaning, expected

MarginofSafety

Just a little tid bit

The value computed in APT is used as interceptin multifactor models. So APT gives you what the return SHOULD BE (based on RFR and factor sensitivities). Then use that in multifactor models as the intercept, meaning the intercept is just the expected return. The multifactor model will adjust this "expected return" for surprises in certain relevant economic indicators like GDP and inflation.