Regional Differences Of The Chinese Stock Market Wealth Effect

With the development of the stock market, financial assets have continued increasing in the assets structure of the residents. The impact of the price fluctuations of financial assets is becoming increasingly prominent. The wealth effect of stock market is that the increase or decrease of capital wealth of stock will affect consumer spending which would in turn have an impact on economic development. After more than 10 years'development, stock market has been taking on a more and more important role in China's economic, social and cultural development, especially when going through stock ownership reform in 2006 and the unprecedented bull market in 2007, thus the wealth effect of stock market could have possibly emerged as an important phenomenon. What's the special characters of our market's wealth effect, will there be any regional differences, what factors might result in those differences? Those problems are very practical subjects to tackle and their theoretical contributions will also be significant.On one hand, this paper takes the wealth effect of the stock market as the starting point, consumption theory as the basis of the analysis. Based on the fixed-effect model with panel data from 31 different provinces in China under direct algorithm and indirect algorithm respectively, our emipirical study result shows there are a quarter of the provinces showing wealth effect of statistical significance, among which Zhejiang, Jiangsu, Guangdong have the top three lagest wealth effect coefficients, while in other less developed regions, the coefficients are not significant. On the other hand, this paper also makes empirical study for the impact of changes in stock market and labor income on consumption, investigates long-term balance among stock market and labor income and the expenditure of consumption through cointergration analysis and VAR models and impulse response function handling non-stationary time series of Zhejiang, Jiangsu, Guangdong provinces respectively. The results further show that, in Zhejiang, Jiangsu, Guangdong provinces, the increase in stock market wealth have the positive impact on growth in consumption significantly. This paper summarizes the reasons that various regions in China have differences in the stock market wealth effect, including income levels, the stock market participation, the accumulation of wealth obtained from the stock market and other factors.The paper integrates theoretical and practical commitment and tries to cover the realitles in China with the theory, data and model used in discussion in order to get reliable conclusions, so that stock market and macro economy can develop with health, continuation and stability.