Time-varying Correlation Between Stock Market Returns And Real Estate Returns In Chinese Market

Since the early1990s, our country formally entered the era of having the securities market after its founding the Shanghai Stock Exchange and Shenzhen Stock Exchange. Our country stock market has a very well development and plays a more and more important role in the allocation of resources in the next more than20years. In addition, real estate has gradually become the backbone industry of China’s economic along with the development of real estate market. Stock market and real estate market play an vital role in the economic development of our country. The study of the relationship between two markets has important significance in the adjustment of national economic policy and market investment flows. Fluctuations in stock prices and real estate market price changes will affect the stock of private wealth, which will decide the income distribution of residents. Therefore it w,ill affect the relationship between the supply and demand of economic and asset allocation.In recent years, domestic and foreign scholars took many studies on the relationship between stock market and real estate market from different aspects. The study of logarithmic results show that they do exist a certain correlation between two markets and the relationship is more sensitive to the macro economic environment changes. At present, the domestic research mainly study the yields relationship between the two markets by simple qualitative analysis. However, different empirical conclusions are drawn in the process of research on the correlation of two markets by the domestic scholars. They have different opinions in the correlation of the two transmission mechanism. I divide different study phases according to the different policy background and important economic events and study their features of yield in each time period respectively. At last, some policies and suggestions in terms of macro policy and investors choose are provided according to the empirical results.This paper using DCC-GARCH model, based on the different policy background and economic events. The main conclusion of empirical research on the relation between Chinese stock market and real estate market returns,dividing the research period in two, is:(1) In the period of January2005to June2014, our country stock market yields is a Granger cause of real estate market return volatility.There is certain positive correlation between stock market return and real estate market return.(2) In this paper, the period is divided into two reasearch stages,based on the different policy background and economic events.,and do the Granger test at each stage.Then,This paper used the DCC-GARCH model in quantitative analysis of the correlation between stock market return and real estate market return. It is concluded that the stock market and real estate market yields present different characteristics in different stages of research stage.So every stage of the research results is different with the whole.The mainly innovation of this article include three point:(1) Research methods:This article present the correlation between stock mark-et returns and real estate market returns features at each point in time by DCC-GARCH model.(2) The research perspective:Through empirical study, this article turned out the point of views that the stock market volatility is the Granger cause of real estate market return volatility on the whole, but in different stages of study presents differ-rent characteristics, which can partly explain the empirical conclusions are not unified in the pase research results.(3) The analysis of the conclusion:This paper analyze the correlation characteristics of the returns of stock market and real estate market from not only the macroscopic factors. but also from the perspective of portfolio theory to interpret the empirical results, through the analysis of market money flows and investors decide.