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The relationship between the real estate and stock markets of China: evidence from a nonlinear model

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  • Yu-Shao Liu
  • Chi-Wei Su

Abstract

The use of asymmetrical threshold cointegration tests is adopted in this study to investigate whether any significant relationship or asymmetric adjustment exists between the real estate and stock markets of China. Our results indicate the existence of a long run nonlinear relationship between the Shenzhen Composite Index and the Real Estate Price Index. In the short run, the Granger causality test favours the 'wealth effect' hypothesis; conversely, in the long run, the existence of the 'credit price' effect is discernible above a certain threshold value, whilst the 'wealth effect' is apparent below this threshold value, which implies a bidirectional feedback causal relationship. Our empirical results demonstrate that in the long run, the price transmissions between these two markets are nonlinear and asymmetric.

Suggested Citation

  • Yu-Shao Liu & Chi-Wei Su, 2010. "The relationship between the real estate and stock markets of China: evidence from a nonlinear model," Applied Financial Economics, Taylor & Francis Journals, vol. 20(22), pages 1741-1749.
  • Handle: RePEc:taf:apfiec:v:20:y:2010:i:22:p:1741-1749
    DOI: 10.1080/09603107.2010.524616
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    1. repec:prg:jnlpep:v:preprint:id:560:p:1-15 is not listed on IDEAS
    2. repec:eee:reveco:v:55:y:2018:i:c:p:145-172 is not listed on IDEAS
    3. Anita CEH CASNI & Maruska VIZEK, 2014. "Interactions between Real Estate and Equity Markets: an Investigation of Linkages in Developed and Emerging Countries," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 64(2), pages 100-119, March.
    4. MeiChi Huang & Tzu-Chien Wang, 2015. "Housing-bubble vulnerability and diversification opportunities during housing boom–bust cycles: evidence from decomposition of asset price returns," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 54(2), pages 605-637, March.

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