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For APT to generate correct prices, we need: All investors to be rational A few wealthy investors able to find and take advantage of arbitrages

  1. For APT to generate correct prices, we need:
    1. All investors to be rational
    2. A few wealthy investors able to find and take advantage of arbitrages
    3. To only use it to price portfolios, not individual assets
    4. All investors to have the same beliefs about asset prices

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