We consider a world capital market in which the investor population is heterogenous. Investors of different countries differ in the prices of goods at which they consume the income from their investments. In such a setting, the international CAPM incorporates rewards for exchange rate risk, in...

The distinction between domicile and place of business is becoming more and more relevant as a growing number of firms have activities abroad. In most statistical studies of international stock returns, a firm is included in a country's index if its headquarters are located in that country. This...