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Relationship between the Real Estate Sector and the Stock Market in Chinese Provinces

Author

Listed:
  • Di, Zeyu

    (Jönköping University, Sogang University)

  • Heshmati, Almas

    (Jönköping University)

  • Liu, Sijia

    (Jönköping University, Sogang University)

Abstract

In China, real estate and the stock market are the two main markets favored by both individual and institutional investors. There is a significant economic link between the two. Therefore, their relationship and long-term and short-term causality can provide good guidance for investors. This paper studies the causality and correlation relationship between the stock market and real estate sector's trading volumes in 31 provinces of China. Its empirical results are based on panel data from 2000 to 2016. Various panel unit root, co-integration, and model specification and estimation tests are carried out. The panel mean group is found to be the most suitable method for the analysis. The study finds that the main industries in different provinces may affect the short-term causal relationship between the real estate sector and the stock market. But in the long-run, the causal relationship between the two is 2-way and stable.

Suggested Citation

  • Di, Zeyu & Heshmati, Almas & Liu, Sijia, 2022. "Relationship between the Real Estate Sector and the Stock Market in Chinese Provinces," IZA Discussion Papers 15207, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp15207
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    More about this item

    Keywords

    real estate; stock market; causal relationship; asset allocation; portfolio; economic area; Chinese provinces;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock

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