The Effect of Oil and Gold Prices on Iran Stock Price Index Using Vector Error Correction Model

Iran stock exchange is the main component of Iran’s capital market that has drew more attention to itself during recent years. Iran’s stock market are influencing by many factors which some of them are exogenous. In this study، the impacts of the exogenous oil and gold prices on Iran’s stock price index during the June 2000 till the November 2010 have been investigated. For this aim، the vector error correction model، impulse response function and variance decomposition have been used. The Result of long-term dynamic model shows a long-term equilibrium relationship between variables. The results also indicate that gold price has significant positive impact on stock price index while oil price has significant negative impact. Error correction coefficient indicates the slowing down of the short-term adjustment in long-term equilibrium.