The present research is intended to study the effect of oil shocks on stock price index in Iran. For this purpose, the appropriate model has been analyzed by means of seasonal data (1997-2011) and Vector Auto-Regression (VAR) technique and Vector Error Correction Model (VECM) method. The results of long run cointegration equation indicated that by assuming other fixed conditions, the positive shock variable has positive effect and also the negative shock variable has negative effect on total

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... ck price index at Tehran Stock and Exchange Organization (TSEO). The results of Impulse Response Functions (IRFs) showed that a sudden variable or shock up to one unit increase in standard deviation in variables of positive oil shock has small but stable effect on stock price index while a sudden variable or shock with one unit increase in standard deviation in negative oil shock variables and also its fluctuation has more effect on stock price index. Similarly, analysis of variance for stock price index indicated that over the time and after stock price index, oil price and exchange rate play the highest role in variation of stock price index. The positive and negative oil shocks have more effect on short term on stock price index than in long run.