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Trader differences in Shanghai’s A-share and B-share markets: Effects on interaction with the Shanghai housing market

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  • Lin, Wen-Yuan
  • Tsai, I-Chun

Abstract

This study analyzes the relationship between the second-hand house price index of Shanghai and Shanghai stock market indices distinguishing between the A-share market, in which Chinese investors predominate, and the B-share market, in which foreign investors predominate. Monthly data for the period April 2003 to June 2018 are analyzed using VAR and GARCH methods. The A-share market shows little covariance with the housing market, whereas the B-share market generally shows a negative covariance, indicating the potential for B-shares to provide risk diversification for Shanghai house owners. Using VAR estimation, a positive shock to the housing market is found to have a negative effect on the A-share market contrary to a positive such credit-price effect between stocks and house prices established for developed countries, perhaps due to a crowding-out of rising house prices on share purchase. Using GARCH estimation, however, the negative credit-price effect is discerned to apply only for negative house price shocks, suggesting falling housing prices allow more funds to be diverted to the share market. While the A-share market shows causality in only one direction from house prices to share prices, causality between the B-share and housing markets is two-way. This is consistent with the less restricted B-share market affording better information transmission.

Suggested Citation

  • Lin, Wen-Yuan & Tsai, I-Chun, 2019. "Trader differences in Shanghai’s A-share and B-share markets: Effects on interaction with the Shanghai housing market," Journal of Asian Economics, Elsevier, vol. 64(C), pages 1-1.
    • Handle: RePEc:eee:asieco:v:64:y:2019:i:c:4
    DOI: 10.1016/j.asieco.2019.07.001
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    Cited by:

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    2. Yuexiang Jiang & Luyuan Zheng & Jiazhen Wang, 2021. "Research on external financial risk measurement of China real estate," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5472-5484, October.

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