Consumption-based capital asset pricing model

The consumption-based capital asset pricing model (or CCAPM) is a way to help explain how stock prices move in the stock market. It helps us understand why some stocks increase and decrease in value over time. The way CCAPM works is by looking at how people consume different goods. When people consume a good, like a new phone or a big-screen television, the money they spend on that good is money taken away from something else. Those "lost" investments are called "opportunity costs." The CCAPM uses opportunity costs to help predict how stock prices will move. It says that when people have more money to spend on things, they are likely to buy stocks, and when they don't have extra money to spend, they are less likely to invest in stocks.