The International Capital Asset Pricing Model (CAPM) is a financial theory that extends the traditional CAPM to account for international investments. It incorporates the additional risk associated with foreign exchange movements, taking into consideration both the risk-free rate in the investor’s home country and the equity risk premium for the global market. The international CAPM helps estimate the expected return on an investment in a multinational context by factoring in currency risk and the global market’s systematic risk.
