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Empirical Test of Asymmetric Wealth Effect of China Stock Market

In: The 19th International Conference on Industrial Engineering and Engineering Management

Author

Listed:
  • De-cai Zhou

    (Nanchang University)

  • Hai-dong Xie

    (Nanchang University)

  • Zheng-feng Du

    (Nanchang University)

Abstract

Basing on monthly data from January 2003 to December 2011, Use Multivariate dynamic Markov regime switching model to build the China stock market business cycle index, then use cointegration and error correction model to test its consumptions wealth effect. The test results show that China’s stock market not only has a significant short-term wealth effects, but also has significant long-term wealth effect. However, the coefficient is negative, which is actually a crowding out effect. Using of the autoregressive dynamic distributed lag model, do further empirical analysis and find the asymmetric characteristics of stock market wealth effect in China. The main reason is maybe the substitution effect of investment to consumption larger than those of income effect in China, which may be related to the immature China stock market, investors and instable revenue expectation.

Suggested Citation

  • De-cai Zhou & Hai-dong Xie & Zheng-feng Du, 2013. "Empirical Test of Asymmetric Wealth Effect of China Stock Market," Springer Books, in: Ershi Qi & Jiang Shen & Runliang Dou (ed.), The 19th International Conference on Industrial Engineering and Engineering Management, edition 127, chapter 0, pages 1195-1204, Springer.
    • Handle: RePEc:spr:sprchp:978-3-642-38433-2_125
    DOI: 10.1007/978-3-642-38433-2_125
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