Investigating Macro Drivers of the Total Stock Market Index with a Non-linear Approach in the Form of a Threshold Regression Model

The total index of the Tehran Stock Exchange has accepted different and asymmetric effects from a driving factor in different periods, therefore, the study of factors affecting the total index of the Tehran Stock Exchange with a linear approach will not yield favorable results, and a non-linear approach should be used to investigate the driving force. used the indices of the whole stock market. Therefore, in this research, the asymmetric behavior of macroeconomic factors on the total index of the Tehran Stock Exchange is investigated with a non-linear approach in the form of a threshold regression model using monthly data during the years 2016 to 2022 . As a result, the variables of interbank interest rate and exchange rate played the role of a threshold variable, and the asymmetric effects of macroeconomic variables on the stock market were seen around these threshold variables. Therefore, the policy maker in the stock market should pay special attention to these asymmetric effects, because it can be seen that a variable has different effects on the stock market in different regimes. For example, when the interbank interest rate is lower than the 18% threshold, it has a stronger negative effect on the total index than when the interbank interest rate is above the 18% threshold. Paying attention to this asymmetric effect of macroeconomic variables will reduce the error in policy making in the stock market.