The ICAPM has been extended to a two-factor version by Adler and Dumas (1983)that incorporates what additional type of risk?

A) oil price risk
B) exchange rate risk
C) consumption risk
D) inflation risk

Question

The ICAPM has been extended to a two-factor version by Adler and Dumas (1983)that incorporates what additional type of risk?

A) oil price risk
B) exchange rate risk
C) consumption risk
D) inflation risk

Quizplus · Accepted Answer

Adler and Dumas (1983)provide a framework for the international pricing of securities incorporating the different consumption preferences of individuals across national markets.The model consists of two sources of risk.The first is the world market risk,akin to that in Solnik's model,while the second is for exchange rate risk.

The ICAPM Has Been Extended to a Two-Factor Version by Adler