Analysis Of China Real Estate Market And Stock Market In Consideration Of Structural Breaks

In the first part of the paper, the theory of equal marginal benefit and credit cycle are applied to analyse the inner mechanism of interaction of real estate price and stock price, and the relative researches of both domestic and abroad scholars in the field are reviewed. The long term and short term interaction of the two markets and the possible factors that drives them is also proposed in this part. In the second part of the paper, the econometric model used in this paper and their evolutions is illustrated. In the year of 1998, the housing system of China was transferred from and regulation of stock market had been constricted. But the econometric method applied by domestic scholars to study the two markets are mostly classical ones, there are few researches that took structural breaks into consideration in analysing the interaction of the two markets.Since the existence of structural shifts would bias the result of stationary test ,which could lead to mendacious result in cointegration analysis and misleading conclusions. To make up for this shortcoming , the multiple structural breaks test developed by Bai and Perron is introduced in the third part to analyse the Shanghai Composite Index which represents stock market, and House Prosperity Indices which represents real estate market. The results exhibits that both index are trend stationary series , exogenous shocks only have temporary effects both series. The results of multiple structural breaks shows that real estate market is synchronise with macro economy, while the stock market only loosely relates to macro economy.