An Empirical Study About Consumption-based Capital Asset Pricing Model

The theory of consumption capital asset pricing model(CCAPM)studies the problem of investor's intemporal consumption and investment under uncertainty environment. The theory uniforms the consumer's choice theory and capital asset pricing theory, and has been the fundamental theory to research consumer's choice and capital gains. But the application of consumption capital asset pricing model doesn't match with the effect of its theory. There exists equity premium puzzle, risk free rate puzzle and equity volatility puzzle. Accordingly, whether CCAPM is suitable for Chinese stock market is naturally focused. The aim of this dissertation is to use the empirical date of Chinese stock market to test the application of CCAPM in China, analysis the dynamic relation of Chinese resident's consumption, premium of stock market and the change of interest rate, review the investor's behavioral characteristic and research whether there exist equity premium puzzle in Chinese stock market.This dissertation introduces CCAPM with power utility of constant coefficient of relative risk aversion - Hansen-Singleton model, CCAPM with the generalized non-expected utility -Epstein-Zin model, CCAPM based on habit formation-Abel model, which is based on external habit, and Constantinides model, which is based on internal habit. This dissertation choices Hansen-Singleton model, Epstein-Zin model and Abel model to review Chinese investor's behavior characteristic under different market cycles. The results suggest that Chinese stock market hold empirically the nonlinear hypothesis of rational expectation. But there doesn't exist equity premium puzzle in Chinese stock market, and the investors appear different behavioral characteristics under different market cycles. In bull, investors incline to temporal consumption and higher risk aversion. In bear, investors incline to future consumption and irrational risk lover. The external habit to representative investor's consumption effect in bull is less than that of in bear. But, the estimation of elasticity of intertemporal substitution(EIS)doesn't release rationally economic meaning.Finally, according to the result of research, the author provides some policy suggestion and the direction of further research.