Comparison of Consumption Based Capital Asset Pricing (CCAPM) and Housing CCAPM (HCCAPM) Model in Explaining Stock Returns in Iran
Azam Mohammadzadeh (),
Mohammad Nabi Shahikitash () and
Reza Roshan ()
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Azam Mohammadzadeh: Ph.D. Student in Financial Economics, University of Sistan and Baluchestan
Mohammad Nabi Shahikitash: Associate Professor of Economics, University of Sistan and Baluchestan
Reza Roshan: Assistant Professor of Economics, University of Persian Gulf
Quarterly Journal of Applied Theories of Economics, 2015, vol. 2, issue 3, 49-72
One of the most important issues in financial economics is the capital asset pricing since in this context various models have been introduced and tested in different economies. One of these models is consumption-based capital asset pricing model (CCAPM) which in this model changes in stock returns related to changes in consumption. Housing CCAPM (HCCAPM) is a derivative of CCAPM model that was introduced in 2007 by Piazzesi et al (2007). In this model representative agent’s utility is function of aggregate of non-housing consumption and housing service consumption while in the model CCAPM, total consumer expenditure considered as a macroeconomic variable. The main purpose of this paper is to investigate effect of housing services and a non-housing consumption good on stock returns. In this paper HCCAPM and CCAPM model is estimated for quarterly data 1367 to 1391 period of the Iran with generalized method of moments (GMM). The results show that all parameters are significant. Estimation of parameters in both models indicates economic factors are patient and very risk-averse. Comparison of these models using log-linear reduced form and Hansen and Jagannathan (HJ)-distance function indicate that CCAPM model explains stock returns better than HCCAPM model.
Keywords: Capital asset pricing; CCAPM model; HCCAPM model; GMM method. (search for similar items in EconPapers)
JEL-codes: G11 G12 G19 (search for similar items in EconPapers)
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