Abstract
This paper offers a new prospect of interactivity of stock market and real estate market, it is found that not only the fundamental factors have impact on this, but the non-fundamental factors like short-term international capital flows play an important role in it. This paper tests the impact from short-term international capital flows on interactivity of stock market and real estate market by using dummy variables describing market conditions based on the “Co-Selling Effect” theory, the results show that the “Co-Selling Effect” does exist when market condition is bad, but this phenomenon could not be observed when market condition is good. This point is consistent with the classic theory.
Highlights
Since 2015, the word “the stock market disaster” can be seen in the media, this word refers to the event a sharp rising in stock market have been observed in the first half of 2015 with the downturn of the stock market in the last half of 2015
This paper tests the impact from short-term international capital flows on interactivity of stock market and real estate market by using dummy variables describing market conditions based on the “Co-Selling Effect” theory, the results show that the “Co-Selling Effect” does exist when market condition is bad, but this phenomenon could not be observed when market condition is good
If α6 is significant, it indicates that impact from short-term international capital flows on interactivity is different when return on the first-tier cities real estate market is at different level, If α7 is significant, it indicates that impact from short-term international capital flows on interactivity is different when return on the stock market is at different level
Summary
Since 2015, the word “the stock market disaster” can be seen in the media, this word refers to the event a sharp rising in stock market have been observed in the first half of 2015 with the downturn of the stock market in the last half of 2015. Zhang & Jiang (2014) argued that the interactive relationship of stock market and real estate market is influenced by the substitution effect, credit-price effect and the wealth effect, influenced by GDP, interest rate, labor cost, price level, population age structure and so on Another typical view is that correlations between the house price and stock price depends on the fundamental forces of economic cycle, such viewpoint can be seen in the research of Quan & Titman (1997, 1999), according to their research, when the economic cycle is in the boom phase, at this time the market liquidity is relatively abundant, all asset prices will rise, and when the economic cycle is in the doldrums, all asset prices are depressed by the macroeconomic factors. This paper analyzes the mechanism of short-term international capital’s influence on the interactivity of stock market and real estate market in Chinese first-tier cities which includes Beijing, Shanghai, Guangzhou and Shenzhen, which can overcome the identification difficulties
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