A Study Of The Financial Assets And Housing Wealth Effect

In recent years, wealth of our residents is growing rapidly. The wealth effect on consumption has become one of hot topic in Chinese academic circle. With the development of our financial market and real estate market in scale, value of financial assets and housing assets increases continuously. It plays an important role in the great operation of our county’s economy and enhancement of consumption. Consequently research on the wealth effect of household assets can provide the basis for macroeconomic regulation policy.In this background, this paper analyzed the volatility and asymmetry of the wealth effect on household financial and housing wealth. Firstly, we describe the relevant concepts of the wealth effect. It can explain the wealth effect in the respect of the consumption function. The function discussed the relationship between income and consumption, including Keynes consumption function, theory of Dusenbailey relative income, life cycle hypothesis of Modigliani, Freedman’s permanent income theory and Hall’s theory of random walk. At the same time, this paper described the transmitted mechanism of financial and housing wealth effect and discussed the volatility and asymmetric wealth effect. Secondly, we take advantage of Molly Dean and Freedman’s life cycle and permanent income hypothesis model and Benjamin (2004) model to analyze the wealth effect of savings assets, stock assets and housing assets. We used the unit root test, cointegration test, granger causality test and error correction model of Grainger (EMC) to check the size of three wealth effect. Besides, we used the state space model and the model of the value at risk (VAR) to describe the wealth effect. The conclusion of this paper is as follows:the wealth effect of the savings is the biggest, wealth effect is about0.25. Housing wealth is the second, wealth effect is about0.06. The wealth effect of stock is the last, about0.01. In addition, three kinds of assets are characterized by volatility and asymmetry. The volatility of stock is the largest. The savings is the second. The last is housing wealth. Three types of assets obviously show the characteristics of swing, and the "negative effect" is higher than "positive effect". In the basis of the empirical research, we make a summary on the wealth effect of assets and put forward to promote the consumption of our country.