Research On Influencing Factors Of China’s Real Estate Index

In recent years, under the impetus of urbanization and government regulation policies, the real estate industry gradually turns into a large scale and becomes more standardized. It has become the most substantial industry in the economy, and has made tremendous contributions to China’s economic development.The real estate industry has the characteristic of capital-intensive, which determines its dependence on the stock market, In1993, the Shanghai Stock Exchange published the real estate industry index for the first time, which means that China’s real estate stock market started. Up to now, China’s real estate stock market has development for more than20years, and the real estate sector seems to be the leading sector in the plate. This paper is to study the real estate stock market and tries to explore the factors affecting the real estate sector index from the macro perspective.This paper uses literature analysis, multiple regression analysis and event study method to study the real estate sector index. The main research content and perspectives are elaborated in the following five chapters:Chapter one introduces the main topic. After explaining the background and significance of the topic of this article, it summarizes the domestic and foreign scholars studied literature review of relevant content. On the base of the results of former studies, the research ideas and research methods are chosen.The second chapter is the theoretical analysis of factors affecting the real estate sector index. In order to find factors, firstly it summarizes the status and characteristics of the real estate industry, with data describing the situation of the real estate finance and real estate entities. Then the object of study is determined, which is the real estate sector index. I selected the Shanghai Real Estate Index (000006) as the object of study. Finally comes the theoretical analysis:from basic supply and demand theory and the model of the real estate industry characteristics, the factors affecting the real estate sector index can be divided into three categories, macroeconomic indicators, industry indicators and stock market index namely. In each category, the factors are analyzed to prepare the ground for the empirical analysis.The third chapter is the first part of the empirical analysis. The multiple regression model for the real estate index is established. The model contains thirteen continuous variables, the monthly data from January2004to December2013data gathered. After statistical tests and corrections, the regression model gets four factors which have significant impact on the real estate sector index:the market index, exchange rate, inflation rate, and the amount of new added investment by real estate developing.The fourth chapter is the second part of the empirical study. Event study is used to explore the effectiveness of real estate control policies on the real estate sector index, hoping to supplement a discrete variable which the regression model was not able to contain. This paper selects five largest real estate regulation "upgrade" policy as events after2010, and the event window is from five days before the day the policy introduced to15days after. By calculating the cumulative abnormal return of the real estate sector index in each event and the entire policy, a point of view is considered:some of the short-term impact of the real estate policy on the stock market is not clear, however, overall, the impact of real estate control policies on the real estate index is significant.The fifth chapter is a summary of the contents and some recommendations. Through empirical analysis following aspects have been concluded:first, it can be seen from the regression model, the market index is the biggest factor affecting real estate sector index, followed by China’s exchange rate with the US, and then the inflation rate and new added fixed investment by real estate developing. It indicates that China’s real estate index is affected by many factors in the macro environment to some extent, particularly the impact of the situation in the stock market itself, and a disjointed phenomenon exists between the real estate industry and it stock market. Second, the real estate index fluctuates greater than the market index. Third, on the whole, China’s real estate control policies has a significant impact on the real estate sector index, leading a negative excess returns for investors; But some single policy seems not that much significant. Therefore, this article develops some recommendations from two angles. For investors, when real estate control policies comes out rapid and intensive, they should hold less in the short term; They also should be noted in the long term, to hedge the risk and optimize their investment portfolio. Real estate policy makers should focus on exchange rate system to avoid the negative impact of RMB appreciation on real estate equity markets; They also should pay attention to information disclosure of listed real estate companies, and promote the effectiveness of real estate stock market through correct interpretation of the real estate control policies.Highlights of this study are as follows:First, the subject of the article is relatively new. When studying real estate industry, few people research the real estate sector index, and even fewer people analyze multiple factors of it. Second, two empirical research methods, trying to make the study more complete. Third, the data used in regression models have been updated to December2013and select real estate control policies after2010as five large-scale upgrade of regulations. Fourth, the paper was first to recommend that policymakers should strengthen the correct interpretation of each macro-control policies, thus more quickly to lead the industry to be more healthy, but also to guide the investors, help promote real estate stock market effectiveness.