The empirical relationship between aggregate consumption and security prices in Australia

This paper provides an empirical examination of the consumption-based capital asset pricing model (CCAPM) using Australian data. Multivariate tests of the CCAPM using actual quarterly consumption data indicate good support for the CCAPM. In a second phase of tests, the maximum correlation portfolio (MCP) is used to proxy the consumption variable using monthly data. Generally, the results of these tests are very mixed. Finally, for non-nested tests of the CCAPM versus the CAPM the evidence favours the traditional CAPM using quarterly data, but is inconclusive using monthly data.