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The Impact of Macroeconomic Variables on Stock Prices:The Case of Tehran Stock Exchange

Author

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  • Hassanzadeh , Ali

    () (Monetary and Banking Research Institute (MBRI), Central Bank of the Islamic Republic of Iran (CBI))

  • Kianvand , Mehran

    () (Islamic Azad University)

Abstract

This paper examines the effects of selected macroeconomic variables on the stock market index in Iran. Using quarterly data, we examine the relationships between the Tehran Stock Index (TSI) and five macroeconomic variables which consist of gross domestic product, nominal effective exchange rate, money supply, gold coin price and investment in housing sector from 1996:1 to 2008:1.Various econometric analyses such as Co-integration and Vector Error Correction Method (VECM) are employed on time series data. It finds that Iran's stock market index is positively influenced by the growth rate of the GDP, the money supply and negatively affected by the gold prices, the private sector investment in housing sector and the nominal effective exchange rate.

Suggested Citation

  • Hassanzadeh , Ali & Kianvand , Mehran, 2012. "The Impact of Macroeconomic Variables on Stock Prices:The Case of Tehran Stock Exchange," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 6(2), pages 171-190, December.
  • Handle: RePEc:mbr:jmonec:v:6:y:2012:i:2:p:171-190
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    References listed on IDEAS

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    1. Ross, Stephen A., 1976. "The arbitrage theory of capital asset pricing," Journal of Economic Theory, Elsevier, vol. 13(3), pages 341-360, December.
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    3. Fama, Eugene F, 1990. " Stock Returns, Expected Returns, and Real Activity," Journal of Finance, American Finance Association, vol. 45(4), pages 1089-1108, September.
    4. Fama, Eugene F, 1981. "Stock Returns, Real Activity, Inflation, and Money," American Economic Review, American Economic Association, vol. 71(4), pages 545-565, September.
    5. Schwert, G William, 1990. " Stock Returns and Real Activity: A Century of Evidence," Journal of Finance, American Finance Association, vol. 45(4), pages 1237-1257, September.
    6. Black, Angela & Fraser, Patricia & MacDonald, Ronald, 1997. "Business Conditions and Speculative Assets," The Manchester School of Economic & Social Studies, University of Manchester, vol. 65(4), pages 379-393, September.
    7. Mukherjee, Tarun K & Naka, Atsuyuki, 1995. "Dynamic Relations between Macroeconomic Variables and the Japanese Stock Market: An Application of a Vector Error Correction Model," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 18(2), pages 223-237, Summer.
    8. Mohsen Mehrara, 2007. "The Relationship between Stock Market and Macroeconomic Variables: a Case Study for Iran," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 12(1), pages 51-62, winter.
    9. Yu Hsing, 2011. "The Stock Market and Macroeconomic Variables in a BRICS Country and Policy Implications," International Journal of Economics and Financial Issues, Econjournals, vol. 1(1), pages 12-18.
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    11. Maysami, Ramin Cooper & Koh, Tiong Sim, 2000. "A vector error correction model of the Singapore stock market," International Review of Economics & Finance, Elsevier, vol. 9(1), pages 79-96, February.
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    Cited by:

    1. Naoyuki Yoshino & Farhad Taghizadeh-Hesary & Ali Hassanzadeh & Ahmad Danu Prasetyo, 2014. "Response of Stock Markets to Monetary Policy : An Asian Stock Market Perspective," Macroeconomics Working Papers 24516, East Asian Bureau of Economic Research.
    2. repec:mbr:jmonec:v:12:y:2017:i:2:p:107-122 is not listed on IDEAS
    3. repec:eut:journl:v:20:y:2016:i:4:p:501 is not listed on IDEAS

    More about this item

    Keywords

    Stock Market; Macroeconomic Variables; Co-integration;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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