A company in emerging market and need risk free rate for CAPM, have taken Equity risk premium after accounting the country risk premium. My question is that risk free rate should be US rate or the country rate (i am not getting country rate in Bloomberg). And beta should be against S&P 500 or local index. please help

Question

A company in emerging market and need risk free rate for CAPM, have taken Equity  risk premium after accounting the country risk premium. My question is that risk free rate should be US rate or the country rate (i am not getting country rate in Bloomberg). And beta should be against S&P 500 or local index. please help

anonymous · Answer

If you are using returns in dollars you should take rf in dollars (ex: 30 year or 10 year treasury bond in united states). So you apply the original version of CAPM and then you add the corresponding CRP or EMBI+. Beta is vs SP500 because your are using returns in dollars (so you convert the prices of your stock and then you calculate the returns in USD)