Finding
Moreover, most papers only consider house price changes and do not distinguish the effects of housing supply and demand.
Paper
House Price Shocks, Stock Returns, and Policy Uncertainty: An Empirical Analysis Based on SVAR Models
Abstract
This paper investigates the dynamic relationship among house price shocks, stock returns, and economic policy uncertainty (EPU) using a Structural VAR framework for a data sample of China over the period 1997-2016. The conclusions drawn are as follows. (1) An increase in EPU decreases house prices. A rise in house prices decreases EPU, while a rise in house supply increases EPU. (2) An increase in EPU decreases stock prices in the short term, while a rise in stock prices decreases EPU. (3) The interaction between stock prices and house prices is statistically insignificant. On the basis of the findings, relevant suggestions are put forward. Introduction A well-functioning capital market is important not only to finance growth but also to provide economic stability. It is wellrecognized that housing market and stock market are two of the most popular investment places in China. As an important capital market, the real estate sector is an essential part of any country’s economic growth. Today, with the development of urbanization and improvement of people’s living standards, demand for housing continues to increase. As another important capital market, the stock market is a place where both investors and speculators come together to actively participate. Stock prices are determined by many factors, such as the economy, politics, investors’ preferences, and trade technology. Therefore, stock investors are very sensitive to economic policies and also pay great attention to house prices. With the emergence of the 2008 global financial crisis, increasing economic policy uncertainty (EPU) has had a serious influence on both real estate and stock markets. On the other hand, house and stock price fluctuations also influence economic policies, as authorities look to stabilize their economy and avoid any adverse economic phenomenon like a housing bubble. In short, it is critical to find the linkages among housing prices, stock prices, and economic policy uncertainty. Figuring out the interactions and reciprocal influences of those three things can help people and authorities understand the factors affecting asset price swings and market uncertainty risks. Governments should supervise the markets and ensure that the economic system undergoes stable development. Previous researches mainly focus on the relationship between house price and stock price. Liang and Naranjo [1] point out that these two variables have a co-integration relationship. Clayton [2] holds the opinion that changes in the real estate market have a huge impact on the stock market. For the relationship between asset prices and economic policies, Genberg [3] believes that asset price fluctuations influence financial stability and macroeconomic stability. Most researchers focus on the interactions between only two of the three variables (house price, stock and EPU). Research on the three variables together has not yet been carried out. The majority of researchers pick monetary policy as a reference factor that effects macroeconomic fluctuations, while not taking EPU into account. Moreover, most papers only consider house price changes and do not distinguish the effects of housing supply and demand. Hence, this paper analyzes house prices’ impact on China’s macro-economy from two perspectives (housing supply and demand), demonstrates a more comprehensive analysis of the relationships among house price, stock price, and EPU and provides decision-making advice for investors, enterprises, and the government. 81 Copyright © 2018, the Authors. Published by Atlantis Press. This is an open access article under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/). 2018 5th International Conference on Management Science and Management Innovation (MSMI 2018) Advances in Economics, Business and Management Research (AEBMR), volume 54
Authors
Yi-Xuan Lin, Xuan Wei, Chi‐Chuan Lee
Journal
Journal name not available for this finding