The multifactor APT does not provide specific guidance on determining risk premiums on factor portfolios, whereas the CAPM does for its single factor. Investors must use the market data to deduce the risk premiums for APT's multiple factors.
The pricing model that provides no guidance concerning the determination of the risk premium on factor portfolios is the multifactor APT (Arbitrage Pricing Theory). This model leans on multiple factors in determining expected returns, yet does not precisely specify the risk premiums associated with each of these factors. On the other hand, the CAPM (Capital Asset Pricing Model) does offer a specific guideline for the risk premium tied to its single factor, the market portfolio.
While the CAPM defines the risk premium using the market beta of an asset relative to the overall market, APT allows for multiple sources of risk and their independent premiums, but it does not specify the values of these risk premiums. Therefore, it requires users to figure out what is appropriate for each factor on their own, or to use empirical data to estimate these risk premiums.
when it comes to the pricing models and their guidance on setting risk premiums on factor portfolios, it is the multifactor APT that lacks specificity, leaving investors and financial modelers to deduce these premiums from the market themselves.