The Research On China’s Stock Market Wealth Effect In Different Sectors

Each time the stock market fluctuates, the wealth of stock holder would be affected, in turn which changes the investor’s consumption expenditure. This transmission mechanism is called the wealth effect of stock market. At the end of the 20th century, with the price rise of the stock, consumption improved obviously and economic growth apparently. From then on, the academic research started focus on the impact on the industrial development leading by the Wealth Effect of Stock Market. But the research to this topic mainly focus on stock market whether possess the wealth effect or not. This paper on the basis of the stock wealth effect, focuses on China’s stock market wealth effect to different influence and reasons in four different sectors (retail industry, gold and silver jewelry industry, car goods industry and catering industry). The significance of this research topic:First, to determine the stock market’s influence to the consumer market; Second, if the stock market wealth effect is related to consumption, how to use the stock market as a supplementary tool to help countries adapt to the economic growthFirstly, this research reviews the latest theories of the relevant field both domestically and abroad, and then gives the definition of the wealth effect of stock market and illustrates its mechanism. Nevertheless, this research demonstrates the characteristics and transmission mechanism of the wealth effect of stock market by make a comparison among various kinds of theories on consumption function. Based on that, this research selects the modern consumption function theory as the basic theory to establish the empirical model which analyses the consumption differences in four sectors. The data is referenced from the National Bureau of Statistics, who release data on China’s the wealth effect of stock market in its website quarterly. The research results are tested by statistical method and economic significance method. Through the empirical analysis, the Chinese stock market wealth effect is weak in these four sectors, and the disposable income plays a decisive role in this four sectors consumption in our country. This paper considers that the reasons lead to weak stock wealth effect in China mainly include six aspects:investors structure, financial assets structure, uncertainty forecast, stock market volatility, market regulation and "substitution effect". And this paper considers that the reasons lead to industry differences in Chinese stock market wealth effect include three aspects:Stock market returns hold a low proportion in the disposable income, Gold and silver jewelry, and cars relying heavily on urban consumer, Stock market returns more used to improve livelihood.Finally, this research tries to make five suggestions on how to increase the wealth effect of stock market to improve the development of industry, these five suggestions mainly include stock market scale, market stability, market regulation, profit distribution, and consumption concept.