The Single Index Model (SIM) is a univariate (one independent variable) regression model of stock/portfolio excess returns. What are the differences between the SIM and the CAPM? Describe how market 'arbitrage' activity is used in the development of the Arbitrage Pricing Theory (APT) We develop a multiple factor model of excess stock/portfolio returns. Stock A and well-diversified portfolio H have the same factor exposures. Analyzing factor exposures we discover that stock A is underpriced relative to portfolio H. Can we exploit this mis-pricing using the Arbitrage Pricing Theory (APT)? What implications does this have for the APT