International Asset Pricing Model

The International Asset Pricing Model (IAPM) explains how investors in different countries evaluate the risk and return of financial assets globally. It considers factors like interest rates, inflation, and currency changes to determine the expected return for an investment. Essentially, it helps understand why assets in different countries offer varying returns, based on the risk involved, including economic stability and currency fluctuations. The model encourages investors to diversify internationally, balancing risks and rewards across markets. It provides a framework to assess how global factors influence investment decisions and asset prices across countries.