International Asset Pricing Model

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International Asset Pricing Model (IAPM)

The international version of the CAPM assuming that investors in each country share the same consumption basket and purchasing power parity holds.

International Asset Pricing Model

A version of the Capital Asset Pricing Model applied to international investments. Like the CAPM, it attempts to describe the relationship between the risk and the expected return on an investment, which is used to determine an investment's appropriate price. The assumption behind the CAPM is that money has two values: a time value and a risk value. Thus, any risky asset or investment must compensate the investor for both the time spent with his/her money tied up in the investment and the investment's relative riskiness. This compensation must be in addition to the risk-free rate of return. It is important to note that in addition to these factors (which the CAPM and the IAPM hold in common), the IAPM assumes that purchasing power parity holds true in the countries it is investigating.
References in periodicals archive ?
She said IAPM will cooperate with SEC on investor education to see to it that investors understand the market, and know how to invest in it using the right channels and experts in order to avoid the bad experience of the past.
Future rotations of USARCENT staff, IAPMs, IAMs, along with the supporting signal commands will assume the responsibility of helping the USARCENT Commander and DAA conduct informed risk management and risk acceptance for his network enclaves.
The action is in response to the full redemption of IAPM's A series bond issue, the service specified.
The "negative" outlook indicates a potential downgrade in the course of the year due to IAPM's high susceptibility to operational risks, which in turn could lead to untimely repayment of financial obligations.
To examine whether the cross-listing effects spread uniformly to the singly- and cross-listed stocks, all the information (of singly- and cross-listed stocks) is pooled to estimate the IAPM coefficients (Equation (8)).
(17) The IAPM coefficients were also estimated using monthly information.
(18) Fernandes (2003) uses monthly information to implement a similar IAPM. Foerster and Karolyi (1999) use weekly returns.
The reported coefficients correspond to the following Interna-tional Asset Pricing Model (IAPM): [MATHEMATICAL EXPRESSION NOT REPRODUCIBLE IN ASCII] where [r.sub.it] refers to the weekly excess returns for stock i in period t.
After deriving an IAPM with PPP deviations, this paper uses the model to examine the forward exchange market's riks premium.
Section III derives an intertemporal IAPM with PPP deviations, demonstrates how to translate risk and the price of risk into any nominal or real numeraire using the model's state variables, and identifies testable restrictions not found in the domestic APM.
This characteristic and the assumptions stated in section II permit application of Ross's [1976] APT, and the derivation of an IAPM in nominal country 0 terms.