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

Zeyu Di (), Almas Heshmati () and Sijia Liu ()
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Zeyu Di: Jönköping University, Sogang University
Sijia Liu: Jönköping University, Sogang University

No 15207, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: real estate; stock market; causal relationship; asset allocation; portfolio; economic area; Chinese provinces (search for similar items in EconPapers)
JEL-codes: E22 H54 O16 O18 R53 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2022-04
New Economics Papers: this item is included in nep-cna, nep-mac and nep-ure
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