Investigating Economic and Behavioral Factors Affecting on the Growth of Stock Price Index in the Tehran Stock Exchange

In most of the developed countries, the stock market is considered as the central core of the capital market and it directs large amounts of stray capital to productive and active sectors every year (Hadipoor et al. 2021).Also, in behavioral finance studies conducted in the last decade, empirical evidence has been provided that all investors do not react rationally to information and investors' emotions have been effective on asset pricing (Kumari, 2019).

 THEORETICAL FRAMEWORK:

In some studies, the role of emotional behaviors in stock price fluctuations of Tehran Stock Exchange Organization has been confirmed (Phuong, 2021). With the increase in oil prices, the income of petrochemical, refining  and other oil-related industries will increase. Therefore, the stock price of these companies will also increase. Several studies have examined the relationship between oil prices and the stock market (Zeinoldini et al. 2020, Alamgir, & Bin Amin, 2021). In one approach, with an increase in the exchange rate, the income of companies exporting products to abroad increases, and it causes an increase in the stock price of these companies and ultimately increases the stock price index. Some studies have investigated the relationship between exchange rate fluctuations and stock price index (Nguyen et al. 2020, Çakır, 2021, Huang et al., 2021  & Qalandari & Fallah, 2021(. Housing market is considered as a rival market to the stock market (Zare and Rezaei, 2006). It is expected that with the increase in housing prices, a part of people's assets will enter the housing market and ultimately have a negative effect on the stock market price index.

Based on theoretical foundations and following Singhal et al. (2019) the model is expressed as relation (1):  (1) where: GTEPi,t the growth of Tehran Stock Exchange's total stock index in quarter i of year t, GOILi,t the growth of OPEC oil prices in quarter i of year t, GEXCi,t the growth of the free market exchange rate (US dollar) in quarter i in year t, ARMi,t investor sentiment index (Arms index) in quarter i in year t, GGDPi,t real GDP growth of Iran based on base year 2013 in quarter i in year t and GHPIi,t price growth Housing is in season i in year t.

A large share of the total value of the capital market is related to petrochemical and refining companies, and the increase in oil prices causes an increase in the stock price index of the Tehran Stock Exchange.  Also, the increase in the exchange rate causes a decrease in the purchasing power of people, therefore, to compensate for the decrease in purchasing power, people invest their stagnant money in the stock market to compensate for the decrease in their purchasing power which leads to an increase in the  the stock price index. There is a negative relationship between the stock price index of the Tehran Stock Exchange and the sentiment index of active investors in this market.

CONCLUSIONS & SUGGESTIONS:

The growth of OPEC oil prices, exchange rate growth and GDP growth have a positive effect and the ARMS investors' feelings index and housing price growth have a negative effect on the growth of Tehran Stock Exchange stock index.