Estimating the Consumption-Capital Asset Pricing Model without Consumption Data: Evidence from Denmark

This paper evaluates the ability of the multifactor model of Campbell <p> (1993, 1996) to explain time-series and cross-sectional patterns of <p> Danish stock and bond returns. The model is obtained by substituting <p> consumption out of the intertemporal budget constraint of the representative <p> agent in the traditional consumption-based capital asset pricing <p> model (C-CAPM). This enables the model to be estimated without the <p> use of consumption data. Estimation of the model results in reasonable <p> preference parameter estimates. Unlike previous research based on this <p> model, the restrictions implied by both the conditional and unconditional <p> model are generally not rejected, and Hansen and Jagannathan’s (1997) <p> specification error measures generally imply small pricing errors.