A Study On Long-term Equilibrium And Short-term Adjustment Asymmetry Between The Real Estate Market And The Stock Market

Along with the development of the financial market and real estate markets, stocksand real estate are increasingly becoming the most important asset of residents’ assets.Grasping the long-term trend between the two markets, exploring the characteristics ofthe short-term adjustment between the two markets, related connections between thetwo markets’ research is particularly important. In the early twenty-first century, theCentral Government has been introduced various regulatory policies to solve theproblem of high prices. However, from the development trend of housing prices, thepolicy effect is not significant. In the past two years, the national control policies on thereal estate market is gradually reduced, the development of China’s economy hasentered a "new normal"-economic development trends, with the acceleration of themarket-oriented reforms in various fields, the real estate market will also keepthe pace with the development in the future. The stock is the “barometer” of themacro-economy. Examining the correlation between the stock market and the real estatemarket not only provides a reference for the majority of our resident investor how toown asset allocation between the two markets, but also provides a theoretical basis toimplement economic control policies for the Chinese government.The research between real estate market and the stock market use a newperspective to explore. Two aspects of the study that from long-term equilibrium andshort-term adjustment and three levels of the research from the Macro-economicforecast, theoretical analysis and empirical research, will be used systematic study. First,we sort out the development process of the real estate market and the stock market.From the fluctuation of market data, we found the long-term stability in the interactionbetween the two markets, and the asymmetry of short-term adjustment between the twomarkets. Secondly, we explore the conduction path between the two markets fortheoretical analysis. In this paper we discussed three ways, including macro-economicexpected and market information processing and flow of capital. From an investor’sexpected level of macroeconomic view, the stock market as the macroeconomic"barometer" impact on macroeconomic expectations of investors. It will result in anindirect impact on the development of the real estate market; real estate market affected investors’ macro-economic expectations through the wealth effect. It indirectly affectsthe stock market trend. From the information processing of investors market, theeconomic spillover effects make the existence of complementarity between the realestate market and the stock market interaction. High-risk period of panic through theflock cross-market effect makes infection of the financial risks. From the liquidity ofcapital perspective, highlighting a growing real estate investment property allowsinvestors to increase investment and speculative demand. Under the guidance of theinvestment portfolio theory and the Tobin’s Q theory, the real estate market and thestock market have a "trade-off" competition. To sum up, there is an uncertain linkagebetween the real estate market and the stock markets.In the empirical part of this paper, the main research is that whether there is astable equilibrium long-term relationship between the real estate market and the stockmarket. And when the two markets in the face of unexpected economic shocks deviatefrom the equilibrium, the real estate market and the stock market will haveasymmetrical features of the short-term adjustment. In order to explore the long-termstable equilibrium relationship between real estate and stock market, we use JohansenCo-integration test between the two markets, the empirical results obtained that therehave exist a co-integration relationship between the two markets, namely the twomarkets exists long-term stable equilibrium relationship; Secondly, the introduction ofGranger causality test used to explore the conduction direction between the two markets.Studies show that the stock market is the Granger cause of the real estate market, andthe real estate market on the stock market Granger causality test is not significant.Finally, in order to investigate the short-term adjustment characteristic between the twomarkets, the precise consideration of the real estate market and the stock marketshort-term adjustment, we introduced a non-linear model that is the establishment ofthreshold co-integration model which based on the traditional linear error correctionmodel. The empirical results showed that between the real estate market and the stockmarket, there has a threshold co-integration relationship. It indicated that when thedegree of deviation from equilibrium is less than the threshold value, estate market has atendency towards equalization adjustments, but the stock market does not have an adjustbehavior; when the two markets deviate from the equilibrium level are greater than thethreshold, the two markets simultaneously adjust to imbalances. Finally, through thethreshold co-integration model, we fully confirmed the short-term adjustment has feature asymmetry between the two markets.In this paper, the linkage studies between the real estate market and the stockmarket try to examine the long term and short term adjustments. We get some newexplorations. In the choice of empirical indicators, we use the sales of the real estate andthe market capitalization of the stock market. In the empirical research method, weintroduces non-linear threshold co-integration model which used to get detaileddescription of the short-term adjustment characteristic between the two markets. In thispaper, the mechanism of the association between the real estate and stock markets isanalyzed theoretically, but we do not study the degree of influence conduction effectbetween the two markets measure and measure. Based on these studies, we can also beanalyzed separately and examine the information spillovers, the wealth effect of the realestate market and the stock markets. In addition, we also can use other nonlinear modelsto explore the linkage between the real estate market and the stock market, then wecompared with the empirical results. Investigate the stability and accuracy of theempirical results can be further direction of the research.