Investigating the Relationship between Exchange Rate and Stock Price ( Case Study : iran)

Abstract

Developing countries such as Iran have a high degree of instability in their macroeconomic variables. In these countries, exchange rates, stock prices, and other significant macro variables are fluctuating compared with advanced and industrial economies, and in turn, this creates an unstable environment for investors. Therefore, to guarantee long-term economic growth, it is necessary to analyze the capital market and the key factors affecting the stock price index, such as the exchange rate and its uncertainty. This study investigates the statistical relationship between exchange rate and stock prices. Accordingly, this study utilizes data on the exchange rate and the price index of the stock exchange during the years 2008-2017 to quantify the relationship between these two variables in the Iranian market. The results of the research show that the relationship between the exchange rate and the stock price index is different. The results indicate that the exchange rate and stock prices change in the same direction, and in a long-term analysis, the change in the exchange rate depends on the change in stock prices.