(CAPM). While the CAPM is derived in a static, one-period setting, the CCAPM uses a more realistic, multiple-period setup. The central implication of the CCAPM is that the expected return on an asset is related to "consumption risk", that is, how much the return on the asset correlates with aggregate consumption in the economy. Assets whose returns covaries a lot with aggregate consumption offer large expected returns, as investors want to be compensated for bearing consumption risk.

The CAPM can be derived from the following special