Stock Price Changes On Consumer Spending

Since 1990 and 1991 the Shanghai Stock Exchange and Shenzhen Stock Exchange have established. The development of China's stock market has brought about rapid development of science and technology, resulting in a sharp increase in financial assets. The stock has become an important investment tool for the public, and the stock market may increase or decrease their wealth, which can affect their consumption. Therefore the changes of stock price have a significant impact on household consumption.This paper chooses the data of quarters of 1999 to 2008, and the methods of the paper are the Seasonally Adjusted Series, Single-integration Test and the Johansen Co-integration Test; then the overall stock market has divided into the Bull and Bear stock market, and the use of a lag lagging stock price and increase in the total four shares of stock to short-term and long-term observation of the relationship between consumer spending. In this paper, apart from consumer expenditure, items of household consumption expenditure also includes eight categories of consumer spending, empirical study of the stock price changes on consumer spending and the impact of various types of consumer spending, at the same time explore the many links between short period of time, and according to Poterba and Samwick (1995) articles, in order to share a luxury to test whether there is any change in the consumer wealth effect.Empirical study results indicate that: (1) the overall period, the lag of a lagging stock price than the overall price of the 4 to explain the effect of the consumption good, this is exactly the opposite of the empirical results Poterba and Samwick (1995), but shares in the overall period whether to increase the total price of the 4 lag or lag of a price, the consumer had no significant effect, and the impact of the change of stock on consumer direction is not clear.(2) In Bull period, share price in terms of consumer spending, a lagging stock price index of per capita consumption expenditure and expenditure on transport and communication have a significant positive impact on China's car consumption. There is no significant effect on other types of price changes, but as the scale of economic growth and the stock market continuing to expand, the stock market wealth effect is gradually becoming apparent. This shows that long period of rising stock prices, the future wealth of the residents is expected to increase, thereby increasing the current consumption and future consumption, and due to optimism on the stock market, it will also increase investment in the stock market.(3) In Bear period, the impact of share price on consumption is not significant and the direction is not clear. This is mainly reflected "Ratchet Effect" theory of consumption in China.(4) Setting luxury and non-luxury goods consumer spending as examples to test whether the stock wealth effect on consumption, empirical results showed that there is no significant impact between share prices and luxury goods at 5% significant level, this has the same empirical results to Poterba and Samwick. There is no significant impact between stock prices and luxury expenditure, which equals that wealth effect exists on the share to consumption. It is as a leading indicator of masses' respond to the expect of future income and economic conditions. This can be interpreted by life-cycle - persistent income theory.Through the empirical conclusion, the paper gave some policy recommendations according positive wealth effect being gradually emerging during bull market and the theory of the life cycle - persistent income wealth.