Testing the consumption based CAPM: evidence from a new approach

The goal of this paper is to test the consumption based CAPM. To achieve this goal, we propose a new test capable of examining the unit root null hypothesis in cases of non-trending data. We fi?nd that the real interest rate series and the consumption growth rate series for Australia, Canada, Denmark, France, Italy, the USA, the UK, and Norway are non-stationary. This ?finding is consistent with the expectations of the consumption based CAPM.