International CAPM (ICAPM) - Beyond Extended CAPM

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  • The ICAPM attempts to explain the required return on a risky asset, measured in its own local currency.

  • ICAPM assumption divergences from Extended CAPM

  • The market basket for goods used in calculating CPI does not need to be the same goods, in the same percentages.

  • Purchasing Power Parity does not always prevail.

  • Theoretically, the ICAPM should offer investors sufficient returns for taking on systemic/market risk of returns on the world market of investible securities, measured in the same currency as the one in which the asset's return is attempted to be measured.

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