Estimating, Evaluation and Comparison Consumption-Based Asset Pricing Models with GMM Method and HJ Function

Document Type : Research Paper


1 Associate Professor of Economics, University of Sistan and Baluchestan,

2 PhD student at University of Sistan and Baluchestan

3 Assistant Professor of Economics , Faculty of Humanities, Persian Gulf University


One of the most important issues in financial economics is attention to risk and its relation to returns. One way to examine the relationship between risk and return is using the capital asset pricing model. In this regard this article examines this issue and with the adjustments in consumption-based Asset pricing models (CCAPM), has examined the relationship between return and risk in the Tehran Stock Exchange. These adjustments include changes in the classic utility function. By introducing new variables to utility function and following process optimization for consumer behavior and derivation the corresponding Euler equation, these models are estimate using Generalized Method of Moments (GMM). In this regard, four models were evaluated and compared. The four models include basic CCAPM model, SCAPM, HCCAPM and pricing based on habit formation. The taste for saving parameter in the model SCCAPM means that it can be concluded preferences for savings is significant. The results indicate that consumer spending and its components have been successful in explaining stock returns in the period1367 to 1391. After estimation of the model parameters, using standard Hansen- Jonathan (HJ) compare the performance of the models. The comparison of models suggests that the most efficient model is SCCAPM model in explaining stock returns.
JEL Classification: G11، G12، G1


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  • Receive Date: 27 August 2016
  • Revise Date: 10 December 2016
  • Accept Date: 27 February 2017
  • First Publish Date: 22 June 2017