2 nd INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 nd ICBER 2011) PROCEEDING 350 IMPACT OF MACROECONOMIC VARIABLES ON STOCK MARKET: THE CASE OF IRAN Shahnaz Mashayekh Assistant Professor of Accounting Economic& Social Sciences Faculty, Al-Zahra University, Tehran, Iran Email:Shahnaz_mashayekh@yahoo.com Hadise Haji Moradkhani Master of Accounting Economic& Social Sciences Faculty, Al-Zahra University, Tehran, Iran Email: moradkhani2005@yahoo.com Mahboobeh Jafari Master of Accounting Economic& Social Sciences Faculty, Al-Zahra University, Tehran, Iran Email: jafari.mahboobeh@gmail.com Abstract This paper investigates the relationship between a set of economic variables (i.e. inflation rate, interest rate of one-year investing deposits in state banks, interest rate of bonds and the growth rate of gold price) and Tehran Stock Exchange (TSE) indicators during April 1998 to March 2008. The findings of VAR model & JOHANSEN co- integration test show that the relationship between inflation rate and stock return as well as growth rate of Tehran Stock Market transactions volume in long term is positive and meaningful. Moreover, The results indicate that an increase in bank interest rate through drawing investments results in a reduction in the stock transactions volume growth and return and vice versa. So, stock and money markets can be considered as two competing and supplementary markets in the long run, but the bonds are not the competitor investment opportunity for stock and the increase in its return rate has no negative effects on Tehran stock Exchange. The results of vector-error correction model show that in short run, gold market could be a substitute for stock market and gold return has an important role in explaining the stock market trend, but this relationship is not meaningful in the long run. Keywords: Economic variables, Tehran stock Exchange(TSE), Vector auto-regressive model, Johansen co- integration test, Vector-error correction model. 1. Introduction Both investors and economic decision makers for achieving their purposes need analysis of information; investors for selection the suitable market to invest and reach the