In this paper, we are interested in empirically testing the existence of a long-run relationship between the Spanish stock market and its fundamentals. We are concerned with the behaviour of the aggregate index of the Madrid Stock Exchange in a macroeconomic context. The fundamentals are industrial pro-duction, inflation, and interest rates. We include all the aforementioned variables in a vector autoregression and test the existence of cointegration by way of Johansen's procedure. We find that cointegration exists, and we conclude that there is a long-run relations-hip between the stock market and its fundamentals. The long-run relationship between the variables does not allow us to infer the interrelations between them. In order to obtain some insight into the short-run interactions between the variables, we perform an impulse-response analysis.

Keywords: asset pricing models, stock market and fundamentals, long-run re-lationship, cointegration, impulse response analysis.