Investigating the Influence of World Price of Gold and Oil on the Tehran Stock Exchange Index: Modelling and Forecasting

Stock market is an official market where the stocks exchange under the special regulations and naturally there are several factors which interfere in the forming of information, the view of investors and in the stock index of firms. Some of these factors are domestic and the others are results of the condition of outside variable of domestic economic bound. In this regard, world price of oil as a robust exogenous variable, affects on several economic variable like stock exchange index. On the other hand, world price of gold, also, as a very important variable defines several international monetary and financial changes.(Despite the fact that this role decreases during the time). In this paper we have assessed an influence of the world price index of gold and the world price index of oil on the Tehran stock exchange index by using monthly data from 1/1997 to 12/2006 within a framework of a GARCH model. In this model we identify and choose suitable procedure for forecasting dependent variable. Then, we apply a procedure of checking predictive quality of econometric models as proposed by Fair and Shiller (1990) for investigating the impact of world price index of gold and the world price index of oil on the Tehran stock exchange index. We have found that the world price index of gold has relatively more robust impact than the world price index of oil on the Tehran stock exchange index.