The Reaction of Stock Returns of Iranian Different Industries to Inflation and Interest Rates with the Panel-ARDL Approach

Different Indus tries to Inflation and Interes t Rates with the Panel-ARDL Approach Abs tractConsidering the upward trend of the inflation rate and the relative s tabilization of the nominal interes t rate in Iran, this ques tion becomes important: how have the s tock returns of different indus tries reacted to these two macroeconomic variables?In this article, the effect of inflation and interes t rate on s tock returns of different indus tries in Iran is inves tigated empirically according to monthly data of the period April 2010-March 2022 using Panel-ARDL model.Firs t, to make the comparison between s tock indices of different indus tries possible, these indices were homogenized based on a base month and then the model was es timated.Empirical results show that inflation in the short and long term has a positive and significant effect on the nominal returns of s tocks of various indus tries for the period, but inflation has a negative and significant effect on the real returns in the long term.The nominal interes t rate in the short and long term causes a decrease in the nominal and real returns of s tocks of various indus tries.In addition, the variables of exchange rate, global oil price, and liquidity were also considered as control variables.These results show that s tocks have not been able to protect agains t inflation in the long term, and monetary authorities should pay attention to its effects on the s tock market when managing interes t rates.