Empirical Analysis Of Asset Pricing Model Based On Household Consumption

Consumption Capital Asset Pricing Model is perfect in the theory, but it brings so me challenges in empirical analysis. The risk aversion coefficient of the empirical analysis is higher than the reasonable value3. This is the important reason of the equity premium puzzle. Author believes that not all consumers are involved in th e stock market. Combined with demographic changes and the family life cycle the ory, Author will classify consumers to construct new agents. Through empirical an alysis, Author will find the agent who determines the asset price and reasonable r isk aversion coefficient.According to the family life cycle theory, author constructed the individual agents and household agents. Author has empirical analysis on the long-term Consumpti on Capital Asset Pricing Model. The U.S. consumer data and Fama French25po rtfolio yield from1960to2011will be the samples. This article will construct in dividual agents based on a age and household agents based on the average age to h ave the empirical analysis on CCAPM. Empirical results on individual agents show that consumer over45years old data explains the model better, and the risk ave rsion coefficient calculated from these date will be more realistic. Empirical results on household agents show that the stock market price is determined by the famil y who has the highest average ages and the risk aversion coefficient is also calcu lated lower than results based on the overall consumption date. The goodness-of-fit tests is better than other home agents. At last, author also constructs the CG F portfolios (Consumption Growth Factor-mimicking Portfolios) to have empirical analysis for the lack of demography data. The empirical result is the same as the above.Results of this study showed that household consumption is the better data to exp lain the asset pricing model. And the real decision in the price of the asset is the family who has no burden on the family upbringing and education of their childr en. In the same time this article also proves that the long-term consumption will explain the CCAPM model better.