Abstract
Objective: This study investigates the separate relationships between three macroeconomic variables—the consumer price index, oil prices, and foreign exchange rates—and the consolidated price movements of a 28-industry index of stocks listed on the Tehran Stock Exchange during 2010–2014. Methodology: We hypothesize a significant and direct relation between each macro variable and price movements of the 28-industry index. To test our hypotheses, we use econometric methods that include ordinary least squares (OLS), linear regression, the Dickey–Fuller test, the Phillips–Perron unit root test, the F test, and the White test. Results: Results indicate a direct and significant relation between the CPI and the 28-industry index. However, results confirm that there is no significant relation between either the oil price or the exchange rate and the index during the period examined. Conclusion: Results confirmed a significant and direct relation between the CPI and the 24-industry index of Iranian stocks. The first hypothesis of this research was accepted. Our results confirm those of Shahidi and Bad Kobe-ee-Hezare. Their study found that the relation between inflation and stock price is direct, while this study identified the same relation between the CPI and the 24-industry index.
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