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A Comparative Analysis on the Wealth Effect between in the Stock Market and in the Housing Market in China

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  • Lin Liu
  • Kai Shi

Abstract

In this article, a threshold cointegration test within the framework of Autoregressive Distributed Lag model suggested by Li and Lee (2010) was employed to quantify the wealth effects in Chinese stock market and domestic housing market. The time-varying features of wealth effects in these two markets were investigated through rolling regression test. The empirical results show that the substitute effect exists in the status of strong market while the wealth effect exists in the status of weak market. It is noteworthy that the wealth effect in the stock market shows an increasing trend while the wealth effect in the housing market reveals a stable trend. The policy implication is that the authority should properly strengthen the regulation in the stock market and curb the rise of housing price when the markets are in the strong status while should increase the disposable income for residents if the markets are in the weak status.

Suggested Citation

  • Lin Liu & Kai Shi, 2017. "A Comparative Analysis on the Wealth Effect between in the Stock Market and in the Housing Market in China," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(11), pages 118-127, November.
    • Handle: RePEc:ibn:ijefaa:v:9:y:2017:i:11:p:118-127
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    References listed on IDEAS

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    More about this item

    Keywords

    ADL tests for threshold cointegration; stock market wealth effect; housing market wealth effect; rolling regression;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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