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An Alternative Testable Form of the Consumption CAPM.
- Source :
- Journal of Finance (Wiley-Blackwell); Mar1988, Vol. 43 Issue 1, p61-70, 10p
- Publication Year :
- 1988
-
Abstract
- This paper develops a consumption-oriented model of asset prices in a multigood economy that is, in principle, testable even when aggregate consumption of goods and their market prices are only partially observable. Previous studies show that, when there are m consumption goods, equilibrium expected excess returns on securities are functions of their covariances with m + 1 variables-aggregate consumption expenditure and market prices of consumption goods. Without making any further assumptions, the present model shows that a similar equilibrium relationship can be expressed in terms of covariances of asset returns with the following m + 1 variables: market prices of k consumption goods and aggregate consumption of m + 1 - k goods. Because the author's result provides researchers with some flexibility in choosing the set of m + 1 variables that measure riskiness of securities, it should lead to more powerful tests of the model. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 00221082
- Volume :
- 43
- Issue :
- 1
- Database :
- Complementary Index
- Journal :
- Journal of Finance (Wiley-Blackwell)
- Publication Type :
- Academic Journal
- Accession number :
- 4650939
- Full Text :
- https://doi.org/10.1111/j.1540-6261.1988.tb02588.x