Research On The Wealth Effect Of China 's Stock Market

In the stock market, wealth effect means the impact of consumption caused by stock price fluctuations, the essence of which is a method of virtual economy to real economy. By social informatization, capital virtualization, operating with wisdom, if able to manipulate the leverage of wealth effect in the stock market to promote domestic consumption, no doubt is a kind of progress. The importance of their role in the economic development is not only a timely help, but also icing on the cake does not seek. In the current domestic effective demand is insufficient and the international economy dual background, the research on stock market wealth effect will appear very important, it will provide beneficial enlightenment for the healthy development of capital market, expanding domestic demand and promoting economic growth.In the foreign countries, many scholars have focused on the correlation between stock price and consumption, because of the western developed countries relatively perfect capital market, most of those scholars agree that the stock market has significant wealth effect, but domestic research shows that as a result of the limitation of stock market it does not exist or only have a weak wealth effect. In recent years, the acceleration of the pace of Chinese financial market development and prosperity of national economy continue to promote the position in the overall stock market, securitisation rate continuously be improved, the impact of stock market on the macro economy is also growing.Based on the theory of traditional consumption, behavioral financial theory and the knowledge of the psychology, firstly try to explain the transmission mechanism of stock market wealth effect in theory, analysis the influencing factors of stock market wealth effect function, according to these factors to determine the variables, on the basis of "life cycle theory and permanent income theory", using factors related to the stock market, psychology and so on as an important variable in the field to the consumption function. Constructing an empirical model of stock market wealth effect from two aspects:direct and indirect, to verify consumption and influence the long-term equilibrium relationship and short-term fluctuation of stock price. Through the contrast coefficient of the direct and indirect wealth effect, discussing how to play "confidence" in the economy a boost. By establishing a VAR model to forecast analysis and make suggestions that how to make use of the wealth effect to increase household income, to drive the demand and expand consumption.Through the study we found that Chinese stock market has a weak positive wealth effect, direct wealth effect and indirect wealth effect work at the same time, which has a long-term stability of pulling on the consumption function. Among them, the direct wealth effect coefficient is greater than the indirect wealth effect coefficient, direct wealth effect works fast but has a short duration, indirect stock market wealth effect works slowly, which also has a delay interval, but lasts longer time. In both direct and indirect wealth model,the income is the most important factor in the determining factors of person’s consumption. In indirect wealth model, income and stock price are both the explanatory variables of consumer confidence, so, increasing income and improving the stock price will not only increase the real consumption,but also boost consumer confidence and create a lasting positive expectations to the economy.