Investigating the effect of time varying inflation on the industry index (evidence from Iran's stock market)

In recent decades, the inflation rate in Iran, in addition to having an upward trend, has also experienced many fluctuations over time. On the other hand, the industry index, as one of the important indices of the stock market, shows the performance of the stock market and the state of the industry and production of each country, which is also affected by macroeconomic variables such as inflation. Therefore, investigating the effect of inflation on the industrial index of the Iranian stock market provides important results. Therefore, this paper has experimentally investigated the effect of time varying inflation on the Iranian stock market industry index using conditional regression (WLS-Rolling Window) with monthly data during the period from April 2018 to March 2018. Conditional regression results show that the effect of inflation on the industry index is not constant over time, in the sense that inflation has had a positive effect on the industry index at some times and a negative effect on the industry index at some times. In addition, this effect has had a drastic change since August 2019, when the trend of the industry index has changed.