Real Economy Effects on Consumption-Based CAPM

Dandan Zheng, Shusheng Ding, Tianxiang Cui and Huan Jin
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Dandan Zheng: Business School, Ningbo University, Ningbo 315201, China
Shusheng Ding: Business School, Ningbo University, Ningbo 315201, China
Tianxiang Cui: School of Computer Science, University of Nottingham Ningbo China, Ningbo 315104, China
Huan Jin: School of Computer Science, University of Nottingham Ningbo China, Ningbo 315104, China

Mathematics, 2022, vol. 10, issue 3, 1-32

Abstract: The consumption-based capital asset pricing model (CCAPM) is an attractive research field in finance, and extant studies have examined the impacts of different factors towards traditional CCAPM, intending to improve the model from the practical perspective. In this paper, we comprehensively scrutinize the real economy effects on the CCAPM by comprising expenditure on durable, expenditure on non-durable goods, services, and real estate four factors. Our study pays great attention to the real economy effect on the CCAPM based on two types of portfolios. By employing both time-series and cross-sectional analysis, our empirical results suggest that the real economy factors can help traditional CCAPM to produce better asset pricing results. Particularly, incorporating the real estate component into the CCAPM model can improve its explanation power on the stock market risk. Our results are potentially useful for investors, portfolios managers and policy makers towards the CCAPM.

Keywords: consumption-based capital asset pricing model (CCAPM); durable goods; non-durable goods; real estate; portfolio management; time-series regression; cross-sectional regression (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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