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Journal of Finance Vol. 44 No. 2 1989

Empirical Tests of the Consumption‐Oriented CAPM

Douglas T. Breeden; Michael R. Gibbons; Robert H. Litzenberger1,2,3,4,5

1 Duke University · 2 Linnaeus University · 3 University of Chicago · 4 Desert Research Center · 5 Stanford University

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.

DOI
10.1111/j.1540-6261.1989.tb05056.x
Volume
44
Issue
2
Pages
231-262
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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