An Investigation on the relationship between Inflation and Real Stock Returns in Iran: An Empirical Analysis (1370-1375)

This paper examines the relationship between inflation and real stock returns in Iran duirng 1370-1375.Since the OLS Method requires the variables used in regression Models to be stationary, First we have used Dicky - Fuller tests to determine stationary of the variables and when necessary to use Engle-Granger cointegration tests to check the existence of the Cointegration between the relevant variables used in the regression Models.The results show that there is no significant relationship between inflation and real stock returns in Indirect Method which is called proxy effect. But there is a positive relationship between the two variables in Direct Method. In other words, common stocks in Thehran stock exchange (TSE) were a good hedge against inflation during 1370-1375.