Empirical Test of Asymmetric Wealth Effect of China Stock Market

Zhou De-cai (), Hai-dong Xie and Zheng-feng Du
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Zhou De-cai: Nanchang University
Hai-dong Xie: Nanchang University
Zheng-feng Du: Nanchang University

Chapter Chapter 125 in The 19th International Conference on Industrial Engineering and Engineering Management, 2013, pp 1195-1204 from Springer

Abstract: Abstract Basing on monthly data from January 2003 to December 2011, Use Multivariate dynamic Markov regime switching model to build the China stock market business cycle index, then use cointegration and error correction model to test its consumptions wealth effect. The test results show that China’s stock market not only has a significant short-term wealth effects, but also has significant long-term wealth effect. However, the coefficient is negative, which is actually a crowding out effect. Using of the autoregressive dynamic distributed lag model, do further empirical analysis and find the asymmetric characteristics of stock market wealth effect in China. The main reason is maybe the substitution effect of investment to consumption larger than those of income effect in China, which may be related to the immature China stock market, investors and instable revenue expectation.

Keywords: China stock mark; Asymmetric wealth effect; Business cycle index; Empirical test (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-642-38433-2_125

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DOI: 10.1007/978-3-642-38433-2_125

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