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Consumption-based capital asset pricing model

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The consumption-based capital asset pricing model (CCAPM) is used in finance and economics as an expansion of the capital asset pricing model (CAPM). The CCAPM factors in consumption as a means of understanding and calculating an expected return on investment.

The CCAPM implies that the expected risk premium on a risky asset, defined as the expected return on a risky asset less the risk free return, is proportional to the covariance of its return and consumption in the period of the return.[1]

References

  • "Investopedia "Consumption Capital Asset Pricing Model - CCAPM"". Retrieved 2006-11-04.

References

  1. ^ Romer, David. Advanced Macroeconomics, ch. 7.


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