While this model has established a relationship between the required return for the risk in this equity investment, there are also limitations to it. To better reflect the required return for this investment, it is also advisable to include a factor which accounts for the possible volatility between the U.S. and Country X which may not have a systematic correlation. In addition, a measure of dispersion for the parameters used in the above formula should also be included in the formula to better account for the inherent risks which may be borne by the investor. Do note, however, that the limitations were not addressed in the following analysis.
a relationship between the required return for the risk in this equity investment