Study On The Interaction Between Construction Index, Real Estate Index And Money Supply

The importance of construction industry and real estate industry stands out prominently in the national economy. The support of the healthy development of the two industries is extremely beneficial to the national economy and people’s livelihood. But on account of the high value of the products, the production and operation of these two industries are impelled to obtain the support of huge amount of money. Stock market is the important link between the listed companies and the capital market. Healthy stock market can provide low-cost financing channels for listed companies and thus support the development of the enterprises.This thesis flrst introduces the concepts associated with money supply, the basic theories on stock price formation mechanism and the mutual influence between money supply and stock price, as well as the related methods of econometrics. Further study is made on construction index, real estate index and the relation between different levels of money supply by building econometric models and by using Grainger causal analysis and impulse response analysis. It has been found that after appropriate treatment the series of real estate index can to a certain degree reflect the trend of construction index while the series of construction index cannot strongly correlate with the trend of real estate index. There exists the strongest correlation between Ml-MO levels of money supply and the construction index and real estate index. Furthermore, in some periods of time deviation is easily seen between the two indexes and the operational performance of the listed companies.The research done in this thesis is beneficial to the enhancement of the influence of the policies issued by the Central Bank, Securities Regulatory Commission and other government departments so as to speed up the turning of the stock market from the "speculative" one back to the "financing" one as its original intention. The thesis helps lay a basis for the improvement of the deviation of the two kinds of index in some periods of time from the state of operation of the listed companies. The research can also help high-quality listed companies of construction industry or real estate industry to gradually raise, with the help of the stock market, the low-cost funds that match their real value. The research can guide the investors to understand the relation between the money supply and the change of the stock price of the listed companies in real estate industry and construction industry. The thesis will assist the investors with the ability to analyze correctly the operational performance of the two kinds of listed companies and the real value of their stocks after the influence of money supply is stripped off real estate index and construction index. Precious reference is presented for rational investment in order to support the development of the outstanding listed companies of the two kinds.