It stands for local capital asset pricing model; a capital asset pricing model (CAPM) that is premised on that investors hold only the assets of a specific country (usually where they reside). In this sense, investors don’t have access to opportunities associated with international diversification of risk. This situation implies also that capital markets of individual countries would be completely segmented from an international perspective. According to this type of CAPM, beta is measured relative to the country’s market index and the equity premium to be used is the local market premium. Of the major weaknesses of model is that it doesn’t tackle the issue of currency risk, though it does exist in the real world.

This CAMP model is also known as national CAPM or domestic CAPM.