ICAPM vs Extended CAPM

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SlaveII

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This was on the real test a couple years ago. Does anyone know the difference?
 
International CAPM : portfolio management section
extended CAPM: private company valuation section
 
Extended CAPM assumes PPP holds all the time. Hence, there is no real exchange rate risk. The ICAPM collapses into the ECAPM if you use this assumption.
 
Domestic CAPM => r = rf + b(rm-rf)
Extended CAPM is an extension of Domestic CAPM - extension of domestic CAPM - same formula, market portfolio = market cap weighted portfolio of all risky assets in the world - which would be difficult to find and define.
needs two other assumptions: All consumers have identical consumption baskets
PPP needs to hold.
ICAPM includes the FCRP * Gamma stuff (currency risk premia).
 
CPK I worship your mastery of the material. I need you to answer my thread on CAL/CML please and thank you.
Your humble student,
Reggie
 
I thought the extended added some company risk and size factors?
 
ex CAPM has 2 assumptions:
1) identical consumptions baskets
2) PPP holds at all times
These are bad assumptions.
ICAPM uses:
Domestic rfr + world beta(world equity risk prem) + currency sensitivty(FCRP)
 
jmac01 - no. Same formula, extended to whole world. More assumptions that make it nigh unuseable.
 
Private Company Valuations Page 319 in Scheweser….”The extended version of CAPM includes additional premiums for size and firm specific risk”
 
E-CAPM = CAPM + premium for size + premium for company specific risk if any
 
^^^ I think you guys are talking EXPANDED CAPM not EXTENDED CAMP
Gotta love this material
 
So in summary:
extended capm - same as domestic CAPM with those 2 nasty assumptions
ICAPM - domestic rfr + world beta and FCRP
modified CAPM - domestic CAPM + size premium (cant find in CFAI test where they add the company specific though). Use this in private co valuation.
F U markowitz….making like $50k for every hour long speech he does on how people shoot holes at his nobel prize
 
pg 647 “expanded CAPM is an adaptation of the CAPM that adds to the CAPM a premium for small size and company-specific risk.”
 
^^^ hahaha you are right.
So we have:
ICAPM
extended CAPM
expanded CAPM
modified CAPM
NICE…….losing my mind this late isnt healthy….
 
Thanks guys. I didn’t feel like looking it up. I throw up the alley-oop and you guys slam it down!
 
Nep-hi Wrote:
——————————————————-
> E-CAPM = CAPM + premium for size + premium for
> company specific risk if any
U SAW THE FUTURE GUYS ……..IMPRESSIVE !!!!
 
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