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Impacts of Market Segmentation on ICAPM

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  • The ICAPM is used by some investors to value any and all risky assets on a global basis.
  • The ICAPM is only valid if international capital markets are integrated.
  • If international capital markets are segmented, then assets with the same risk characteristics will be priced differently in different national markets.
  • When barriers to capital market integration cause investors to avoid the balanced world market portfolio, higher allocations will be made to specific countries and specific securities, causing inefficient asset pricing.
  • This inefficiency makes an argument for active portfolio management.
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Moving Exchange Rates and Equity Markets

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Justifying Active Portfolio Management

01
CFA Level 2: Portfolio Management – Introduction
02
Mean-Variance Analysis Assumptions
03
Expected Return and Variance for a Two Asset Portfolio
04
The Minimum Variance Frontier & Efficient Frontier
05
Diversification Benefits
06
The Capital Allocation Line – Introducing the Risk-free Asset
07
The Capital Market Line
08
CAPM & the SML
09
Adding an Asset to a Portfolio – Improving the Minimum Variance Frontier
10
The Market Model for a Security’s Returns
11
Adjusted and Unadjusted Beta
12
Multifactor Models
13
Arbitrage Portfolio Theory (APT) – A Multifactor Macroeconomic Model
14
Risk Factors and Tracking Portfolios
15
Markowitz, MPT, and Market Efficiency
16
International Capital Market Integration
17
Domestic CAPM and Extended CAPM
18
Changes in Real Exchange Rates
19
International CAPM (ICAPM) - Beyond Extended CAPM
20
Measuring Currency Exposure
21
Company Stock Value Responses to Changes in Real Exchange Rates
22
ICAPM vs. Domestic CAPM
23
The J-Curve – Impact of Exchange Rate Changes on National Economies
24
Moving Exchange Rates and Equity Markets
25
Impacts of Market Segmentation on ICAPM
26
Justifying Active Portfolio Management
27
The Treynor-Black Model
28
Portfolio Management Process
29
The Investor Policy Statement

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Securities & Markets
Investment Management