The Impact of Economic Freedom on the Development of the Stock Market

The stock market is an integral part of the financial sector, which in turn is related to the economic growth. In fact, the stock market to disperse the risk with higher returns rates can be more efficient savings allocation between the investment opportunities. Although several factors have impact on the development of the stock market, but the economic freedom had significant impact on the stock price index and cash return as the stock market indices. In fact, economic structure weak and closed space as the main cause of underdevelopment is the stock market in these countries. So purpose study present, study economic freedom on index stock prices and cash returns in the period 1998-2013 with seasonal data. Results estimate econometrics suggests that economic freedom is impact positive and significant on index stock prices and cash returns Iran. Too every one from component index of economic freedom separately except government size is impact positive and significant on index stock prices and cash returns. As well as control variables such as real exchange rate and the ratio of gross fixed capital formation to GDP was Impact positive and significant on index stock prices and cash returns Iran. While the other control variables, bank deposit rates, Liquidity ratio to GDP was impact negative and significant on index stock prices and cash returns Iran.