Relevancy of Investment Decisions and Consumption with Asset Pricing : GMM and CCAPM Model Approach

This study examines the influence of investment decisions and consumption on asset pricing from 1980-2016 and made use of quantitative research design and secondary on climate change variables, GDP, and population of India from 1960- 2017. The data was gotten from Saint Louis Fed, while SP500 (S&P 500 index at closing price of the first day of the month) was from Yahoo Finance. The software used for the data analysis was R Studio and statistical methods such as descriptive statistics, GMM model Fitting and CCAPM Model Fitting were carried out to examine the influence of investment decisions and consumption on asset pricing. The finding of the study shows that Personal Consumption Expenditures: Nondurable Goods (PCE): Nondurable goods, (PCEN) and 1-Year Treasury Constant Maturity Rate (GS1) jointly accounted for about 7.9% of the variance observable in excess return SP500. Furthermore, independently, GS1 (annualized 1-Year Treasury Constant Maturity Rate) was significant while PCE (Personal Consumption Expenditures: Nondurable Goods) and PCEN: Nondurable goods were not significant. The study concluded that investment decisions and consumption significantly influence Asset pricing