Empirical Tests of the Consumption‐Oriented CAPM

Empirical Tests of the Consumption‐Oriented CAPM ABSTRACT The empirical implications of the consumption‐oriented capital asset pricing model (CCAPM) are examined, and its performance is compared with a model based on the market portfolio. The CCAPM is estimated after adjusting for measurement problems associated with reported consumption data. The CCAPM is tested using betas based on both consumption and the portfolio having the maximum correlation with consumption. As predicted by the CCAPM, the market price of risk is significantly positive, and the estimate of the real interest rate is close to zero. The performances of the traditional CAPM and the CCAPM are about the same. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

Empirical Tests of the Consumption‐Oriented CAPM

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Publisher
Wiley
Copyright
1989 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
DOI
10.1111/j.1540-6261.1989.tb05056.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT The empirical implications of the consumption‐oriented capital asset pricing model (CCAPM) are examined, and its performance is compared with a model based on the market portfolio. The CCAPM is estimated after adjusting for measurement problems associated with reported consumption data. The CCAPM is tested using betas based on both consumption and the portfolio having the maximum correlation with consumption. As predicted by the CCAPM, the market price of risk is significantly positive, and the estimate of the real interest rate is close to zero. The performances of the traditional CAPM and the CCAPM are about the same.

Journal

The Journal of FinanceWiley

Published: Jun 1, 1989

References

  • Consumption risk in futures markets
    Breeden, Breeden
  • Testing portfolio efficiency when the zero‐beta rate is unknown: A note
    Shanken, Shanken
  • Capital asset prices: A theory of market equilibrium under conditions of risk
    Sharpe, Sharpe

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