Consumption beta

Consumption beta

In finance, consumption beta refers to a concept in an asset pricing model where the reward-to-risk ratio of an asset is dependent not on its sensitivity (or beta coefficient) to overall market risk, as it is in the classical Capital Asset Pricing Model, but rather on its sensitivity to overall aggregate consumption.[1] It was first proposed by Douglas Breeden in 1979.[2]

References

  1. ^ Brealey, Richard (2002). Capital Investment and Valuation. New York: McGraw-Hill. pp. 175. ISBN 0071383778. http://books.google.com/books?id=eKF8IBCwfy4C. Retrieved 2007-07-22. 
  2. ^ Breeden, Douglas (September, 1979). "An intertemporal asset pricing model with stochastic consumption and investment opportunities". Journal of Financial Economics 7 (3): 265–296. doi:10.1016/0304-405X(79)90016-3. 



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