LONG RUN CONSUMPTION RISK EVIDENCE FROM SINGAPORE MARKET

Abstract

This thesis studies the long-run consumption-based asset pricing model (LR-CCAPM) using data from Singapore market. I find that in Singapore economy, the ultimate intertemporal risk to consumption can explain up to 66% the differences of risk premium across various asset types while Capital Asset Pricing Model (CAPM), or canonical Consumption-based Asset Pricing Model (CCAPM) can only explain up to 18% of these variations. I also discover that the performance of LR-CCAPM is sensitive to the choice of model specifications, in particular, the choice of aggregate or per capita consumption data.