Study On The Relativity Between Shanghai Housing Index And Shanghai Composite Index

In the recent society, the real estate and stock are two of the most important investment assets in any country, the development of them have played a vital role in the economic operations of countries. The stock market is most prone to bubbles in virtual assets, the same to real estate regarding both as the real asset and the virtual asset, they are an important carrier of potential risk. Most foreign experience has shown that there is a large degree of relationship between the real estate bubble and the stock market upheaval. They will transfer the risk between the two markets when this relationship reaches a certain level, causing serious consequences to the economy. Especially discussing over the correlation and interaction between the real estate industry and the stock market is of great significance to guard against financial risk and to formulate macroeconomic policies. From the perspective of investors, it is also important to set up efficient portfolio by studying the relatedness among the real estate industry and the stock market.In this paper, we select Shanghai Housing Index and Shanghai Securities Composite Index as object. Firstly, we find that the constitution of two indices are through weighted average with a fixed base period. At the same time, we also find that.compared with the national prosperity real estate index, China real estate index system has the advantage of the vertical and horizontal comparison, more accurately and timely reaction of the real estate cycle and future trends.Secondly, the article explains related concepts and features of the real estate and stock, pointed out the different industries of real estate with other entities. Combined with dual properties, we study the mechanism with stock market from the consuming channels, financing channels, investment channels, marketing volatility channels.Thirdly, the article discuss the relationship between two indices by empirical research. The study find that the yield two indices has long-term co-integration relationship, and the stock market has wealth effect on the real estate market, while the real estate market has substitution effect and the crowding out effect on the stock market, to explain the empirical results combined with China’s specific national conditions.Finally, combined with the correlation characteristics between two markets, the paper get some thoughts and insights for policy makers and regulators, also asset allocation recommendations for investors and consumers.