A columnist made the following comment in an online article: "In any case, the Q-factor approach, unlike consumption CAPM, explains where the anomalies come from (and why they might end).  Consumption CAPM is sadly quite deficient when it comes to explaining cross-sectional variation in returns across stocks. Most generally, this "investment CAPM" theory is pricing assets from the perspective of their suppliers — firms — rather than their demanders"

Illustrate how expected returns are determined in the neoclassical model for investment, i.e., with reference to the theoretical derivation of the original q-factor model. Compare and explain the difference between the q-factor model and the consumption-CAPM on the determination of the cross section of expected returns.

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The Qfactor model and the consumptionbased Capital Asset Pricing Model CAPM are two different approaches to explaining the crosssectional variation in expected returns on stocks Lets delve into the th... View the full answer