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

Wen-Yuan Lin and I-Chun Tsai

Journal of Asian Economics, 2019, vol. 64, issue C, -

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.

Keywords: China; House price; Stock market; A-shares; B-shares; Foreign portfolio investment; Credit-price effect (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:64:y:2019:i:c:4

DOI: 10.1016/j.asieco.2019.07.001

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