The inclusion of leisure in SDF of the capital assets pricing model and its contribution to household utility: case study of Iran

Articles in Press

Document Type : Research Paper

10.22034/ecoj.2026.61815.3316

Abstract

In this article, it has been tried to include leisure as a risk factor in the random discount factor of the capital asset pricing model and calculate its share in the utility function of the household. So, the data of Iran's economy for the period 1978 to 2021 have been used. First, by using a recursive preferences function such as the function provided by Epstein-Zine, we extracted the Euler equation containing the leisure risk factor. Then, coefficients have been estimated using the GMM. The J statistic confirms the appropriateness of the tools used in estimating the model. The findings show that the contribution of leisure on the desirability of Iranian families is significant and equal to 0.158. It is concluded that the inclusion of leisure as a risk factor in the framework of CCAPM is justified, and with the contribution of this factor to the household's welfare can be measured.

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Applied Theories of Economics

Articles in Press, Accepted Manuscript
Available Online from 12 January 2026

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