A financial model that extends the co
ncepts of the capital asset pricing model (CAPM) to include the amount that an individual or firm wishes to co
nsume in the future. The CCAPM uses co
nsumption measures, in terms of a co
nsumption beta, in its calculation of a given investment's expected return.
To illustrate:
|||In its simplest form, the CCAPM differs from the CAPM by o
nly the beta coefficient used in the calculation. The beta for co
nsumption attempts to measure the covariance between an investor's ability to co
nsume goods and services from investments, and the return from a market index.
In practice, the CCAPM is used less frequently than the CAPM, and should probably o
nly be used on a theoretical basis.