Modeling the effects of macroeconomic variables on the stock market: An Application of Non-linear Distributed Auto-regression Model

This study investigates the effects of macroeconomic variables on the stock market (stock price index).The effects of macroeconomic variables including global gold and oil price, exchange rate, interest rate, economic growth rate on the Iranian stock market has been investigated by using a non-linear distributed auto-regression model .The results indicated that the relationship between oil price and oil price index in the short term and long term is direct and inverse, respectively. The effect of the exchange rate on the stock price index is direct in the short and long term. In such a way that a long-term positive shock will lead to an increase of 0.87 percent and a negative shock of the exchange rate will lead to a decrease of 8.6 percent of the index. The effect of the positive interest rate shock in the short and long term on the stock price index is insignificant. Meanwhile, the negative shock of the mentioned variables will lead to a 0.12 percent decrease in the stock price index and in the short and long term on The positive shock of the gold price on the stock price index is insignificant.In terms of our results, economic growth has positive relationship with the stock price index. This result is in line with a one percent increase in economic growth, the stock price index will improve by 0.09 percent and with a one percent decrease in the economic growth rate, the stock price index will decrease by 0.1 percent.