The Stock Market,the Real Estate Market And Consumer Behavior

The first part of this paper overviews the progress circumstance of wealth effect from the theories study and empirical study. Alexander Ludwig & Torstein Sl?k(2002) analyzed detailed the mechanism of the wealth conducted to consumption from the theories, they studied how the volatility of stock price and real estate price influence on the consumption from all kinds of aspects. The theories study indicated the rising of stock price usually. But, the rising of real estate price affected the growth of consumption ambiguously. The empirical study showed, asset there were widespread existence of the wealth effect, the estimation coefficients of wealth effect usually have one was not significant or it was weak when testing the wealth effect of the real estate market and the stock market.The second part of this article sets up a wealth effect model based on the consumption function according to the life cycle theory. The wealth effect is related to consumption theory closely. In order to study the wealth effect, we will study the consumption function firstly. This paper overviews the foundation of consumption behavior research theories in early days, aims at the consumption behavior under certain condition and uncertain conditions, and then sets up consumption models under certain condition and uncertain condition based on the life cycle consumption function. Through introducing the variety of the property, this paper sets up one model including the stock market and the real estate market on the foundation of the life cycle consumption function model/ long time income model. The consumption function is as follows: Ct =β1 S t +β2Rt +γYtThis model contacts consumption to income and wealth together.β1,β2 andγare marginal prefer coefficients ( MPC) of the stock wealth, the real estate wealth and the income respectively. The estimation of coefficients indicates the fortune would increase along with the expending of consumption.