A study on the effect of interest rate on performance of stock exchange: A case study of Tehran Stock Exchange

Interest rate plays an important role on financial market in any different sectors from real state to auto industry. An increase on interest rates will increase cost of borrowing money from banks, which reduces profitability. The proposed study of this paper investigates the relationship between bank interest rates on performance of stock exchange over the period 2001-2010. The proposed study categorizes interest rates into five different categories including short-term interest rate, special short-term rate, one-year, two-year, three-year, four-year and five-year terms. The results of performing regression analysis have confirmed that there are some positive and meaningful relationship between interest rate in all groups and performance of stock exchange.