The Impact of Macroeconomic Variables on Tehran Stock Exchange Index Performance: An FMOLS Approach

According to the literature, macroeconomic variables have significant effects on financial markets. In addition to investors and traders in these markets, researchers have also paid special attention and sensitivity to these changes. The purpose of this study is to investigate the macro-structural determinants affecting the price index of the Tehran Stock Exchange in the period 1991-2019. To this purpose, the fully modified ordinary least squares estimator (FMOLS) and the Hudrick Prescott filter (HP) were used. Based on the estimation results of the econometric model, economic growth, government budget deficit, and exchange rate have had positive and significant effects on the total price index of the Tehran Stock Exchange, while negative effects on money supply (liquidity) and oil revenue uncertainty index (extracted by HP filter). Economic growth has had a significant effect on the total price index of the Tehran Stock Exchange resulting in negative returns.
JEL Classification: G12, C50, C22, E44