What's the difference between ICAPM and Extended CAPM?

CFA Level II
#1

What’s the difference between ICAPM and Extended CAPM?

#2

ICAPM is a sub part of extended CAPM. Extended capital asset pricing models are models in which expected return is a function of beta, taxes, liquidity, dividend yield etc etc.

#3

Ah I see thanks a lot dude!

#4

Thats a shitty explanation. Extended CAPM has 2 big assumptions: Same basket of goods aross countries (homogenous) Purch Power Parity holds @ any time International DOES NOT REQUIRE THESE ASSUMPTIONS Under ICAPM, all investors hold combo of THEIR countries RF asset and the WORLD market portfolio. It uses domestic/local sensitivities (lambda) to sensitize foreign currency risk premiums.

#5

Just to agree with markCFAIL. Extended CAPM is a rather useless extension of domestic CAPM, as the two assumptions he mentions are unreasonable. ICAPM just says to hold the domestic risk free rate, the world market portfolio, and hedge your currency exposure.

#6

Need to revise this one. Thank you markCFAIL

#7

Thanks for the confirmation mark.