If individual country's capital markets are segmented, the global capital asset pricing model must not be adjusted to reflect the tendency of investors in individual countries to hold local country rather than globally diversified equity portfolios.

Question

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If individual country's capital markets are segmented, the global capital asset pricing model must be adjusted to reflect the tendency of investors in individual countries to hold local country rather than globally diversified equity portfolios. This is because the segmentation of capital markets results in greater home bias in investment portfolios, which affects the correlation between market returns and global variables used in the global CAPM.

If Individual Country's Capital Markets Are Segmented, the Global Capital