Risk and Return: Test of Consumption Based Capital Asset Pricing Model (CCAPM) Versus Traditional Capital Asset Pricing Model (CAPM) in Tehran Exchange Market

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Explanation relation between risk and return and capital asset pricing are concepts which is appointed as dominator and major paradigms in capital markets. So far as after offering CAPM by Sharp & Lintner, this model has been revised and criticized frequently.
In this paper another version of CAPM has been tested versus traditional CAPM in Tehran Stock Exchange. This version of CAPM measures sensitivity of stock return to consumption percapita and consider it as measure of risk. This model is identified as Consumption based Capital Asset Pricing Model or in abbreviation is C-CAPM.
We examine 184 stocks in Tehran Stock Exchange which have not had long deadlock from beginning of 1380 to end of 1385. Despite of the fact that Consumption beta should be a better measure of systematic risk theoretically, but our results show empirical performance of traditional CAPM is more encouraging than C-CAPM, and CAPM had relative success over all tests.
JEL classification: G12

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