The Straightforward Generalization of the Simple CAPM to International Stocks

question 31

Multiple Choice

The straightforward generalization of the simple CAPM to international stocks is problematic because __________.

• A)inflation risk perceptions by different investors in different countries will differ as consumption baskets differ
• B)investors in different countries view exchange rate risk from the perspective of different domestic currencies
• C)taxes, transaction costs and capital barriers across countries make it difficult for investor to hold a world index portfolio
• D)all of the above
• E)none of the above.

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