Journal of Economic Interaction and Coordination

, Volume 14, Issue 4, pp 741–760 | Cite as

Are the stock and real estate markets integrated in China?

  • Chi-Wei Su
  • Xiao-Cui YinEmail author
  • Hsu-Ling Chang
  • Hai-Gang Zhou
Regular Article


This paper examines the dynamic short-run and long-run co-movement between the real estate and stock markets in China by employing a continuous wavelet method. We use gross domestic product and M2 (broad money supply) as control variables to eliminate the common factors of the two markets and to identify the real nexus between them. The empirical results show that the co-movement between real estate and stock prices is weak in the short run, except during the financial crisis period. Since the stock market is highly volatile, while real estate prices are relatively stable, the two markets are less correlated in the short run. The results also show that real estate prices affect stock prices in the long run, which supports the existence of a credit-price effect in China. Real estate prices remained very high in most time periods. Enterprises and individuals can obtain funds from bank loans to invest in the stock market, thus raising stock prices. These findings indicate that the two markets are generally segmented in the short run but are integrated in the long run. The stabilization of the real estate market is critical for stability in the stock market, but not vice versa. Additionally, investments in the two markets may not provide a high level of risk dispersion in the long run in China.


Credit-price effect Wealth effect Substitution effect Co-movement Time frequency 

JEL Classification

G12 E44 R31 


  1. Adcock C, Hua X, Huang Y (2016) Are Chinese stock and property markets integrated or segmented? Eur J Finance 22(4–6):345Google Scholar
  2. Aguiar-Conraria L, Soares MJ (2011) Business cycle synchronization and the Euro: a wavelet analysis. J Macroecon 33(3):477Google Scholar
  3. Apergis N, Lambrinidis L (2007) More evidence on the relationship between the stock and the real estate market. J Soc Sci Res Netw 17:24Google Scholar
  4. Aye G, Balcilar M, Gupta R (2013) Long-and short-run relationships between house and stock prices in South Africa: a nonparametric approach. J Hous Res 22(2):203Google Scholar
  5. Ba SS, Tan CT, Zhu YQ (2009) Interaction between China real estate and stockmarket. Syst Eng 27(9):16Google Scholar
  6. Chan KC, Chang CH (2014) Analysis of bond, real estate, and stock market returns in China. Chin Econ 47(2):27Google Scholar
  7. Chan HL, Woo KY (2013) Studying the dynamic relationships between residential property prices, stock prices, and GDP: lessons from Hong Kong. J Hous Res 22(1):75Google Scholar
  8. Chan KF, Treepongkaruna S, Brooks R, Gray S (2011) Asset market linkages: evidence from financial, commodity and real estate assets. J Bank Finance 35(6):1415Google Scholar
  9. Chang Q (2016) The characteristics of stock price fluctuation and government macro regulation in China. Price Theor Prac 5:21Google Scholar
  10. Chen J (2007) Rapid urbanization in China: a real challenge to soil protection and food security. CATENA 69(1):1Google Scholar
  11. Chen J (2016) Housing system and urbanization in the People’s Republic of China. Asian Development Bank Institute working paperGoogle Scholar
  12. Chen X, Ji X (2017) The effect of house price on stock market participation in China: evidence from the CHFS micro-Data. Emerg Mark Finance Tr (forthcoming)Google Scholar
  13. Cheng Z, Zheng S (2015) The change of relationship between real estate and stock markets in China-An application of VaR mothod.
  14. Deng Y, Girardin E, Joyeux R, Shi S (2017) Did bubbles migrate from the stock to the housing market in China between 2005 and 2010? Institute of Real Estate studies working paper seriesGoogle Scholar
  15. Dickey DA, Fuller WA (1981) Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica 49:1057Google Scholar
  16. Ding H, Chong TTL, Park SY (2014) Nonlinear dependence between stock and real estate markets in China. Econ Lett 124(3):526Google Scholar
  17. Dornbusch R, Fischer S, Startz R (2011) Macroeconomics. McGraw-Hill, New YorkGoogle Scholar
  18. Eichholtz PM, Hartzell DJ (1996) Property shares, appraisals and the stock market: an international perspective. J Real Estate Financ Econ 12(2):163Google Scholar
  19. Fu Y, Ng LK (2001) Market efficiency and return statistics: evidence from real estate and stock markets using a present-value approach. Real Estate Econ 29(2):227Google Scholar
  20. Gao X, Gu AY (2012) The relationship between Chinese real estate market and stock market. J Int Bus Res 11(1):73Google Scholar
  21. Granger CW, Terasvirta T (1993) Modelling non-linear economic relationships. Oxford University Press, OxfordGoogle Scholar
  22. Grinsted A, Moore JC, Jevrejeva S (2004) Application of the cross wavelet transform and wavelet coherence to geophysical time series. Nonlinear Proc Geophys 11:561Google Scholar
  23. He Q, Liu F, Qian Z, Chong TTL (2017) Housing prices and business cycle in China: a DSGE analysis. Int Rev Econ Finance (forthcoming)Google Scholar
  24. Hong ZH, Yin ZL (2007) Interaction between stock and housing prices conceals financial crisis. Western Forum 12:26Google Scholar
  25. Huang B, Zhang Y, Lai RN (2014) Seemingly unrelated stock market and housing market in China—a myth or truth.
  26. Hui EC, Ng IM (2012) Wealth effect, credit price effect, and the inter-relationships between Hong Kong’s property market and stock market. Prop Manag 30(3):255Google Scholar
  27. Ibrahim MH (2010) House price-stock price relations in Thailand: an empirical analysis. Int J Hous Mark Anal 3(1):69Google Scholar
  28. Jin T, Chu M (2013) The mystery on housing price volatility, stock price volatility associated with macroeconomic volatility in China?—Based on the perspective of generalized virtual economy. Res Gen Virt Econ 3:68Google Scholar
  29. Jin T, Chu M (2015) China price fluctuations of house, fluctuations in the stock price impact on resident’s consumer. Res Gen Virt Econ 6(2):71Google Scholar
  30. Kwiatowski D, Phillips PCB, Schmidt P, Shin Y (1992) Testing the null hypothesis of stationary against the alternative of a unit root. J Econ 54:159Google Scholar
  31. Lean HH, Smyth R (2012) REITs, interest rates and stock prices in Malaysia. Int J Bus Soc 13(1):49Google Scholar
  32. Lean HH, Smyth R (2014) Dynamic interaction between house prices and stock prices in Malaysia. Int J Strat Prop Manag 18(2):163Google Scholar
  33. Lee CC, Liang CM, Wu WH, You SM (2013) Interactions between house prices, stock prices and monetary policy-Using recursive VAR. Am J Iin Bus Manag 3(8):645Google Scholar
  34. Lee CC, Lee CC, Chiang SH (2016) Ripple effect and regional house prices dynamics in China. Int J Strat Prop Manag 20(4):397Google Scholar
  35. Li J, Zang XH (2015) Housing price fluctuation and consumption behavior of urban residents in China: an analysis based on dynamic panel data at provincial level. Nankai Econ Stud 1:89Google Scholar
  36. Li XL, Chang T, Miller SM, Balcilar M, Gupta R (2015) The co-movement and causality between the US housing and stock markets in the time and frequency domains. Int Rev Econ Financ 38:220Google Scholar
  37. Li JP, Fan JJ, Su CW, Lobonţ OR (2017) Investment coordinates in the context of housing and stock markets nexus. Appl Econ Lett (forthcoming)Google Scholar
  38. Liang LJ (2016) Macro control tools and the effectiveness on housing price in China (Unpublished doctoral dissertation). University of Hong Kong, Hong KongGoogle Scholar
  39. Lin PT, Fuerst F (2014) The integration of direct real estate and stock markets in Asia. Appl Econ 46(12):1323Google Scholar
  40. Lin TC, Lin ZH (2011) Are stock and real estate markets integrated? An empirical study of six Asian economies. Pac-Basin Finance J 19(5):571Google Scholar
  41. Lin Z, Lin XS (2013) An empirical study on the correlation between real estate market and stock market in China. Stat Decis 12:133Google Scholar
  42. Lin B, Liu C (2016) Why is electricity consumption inconsistent with economic growth in China? Energy Policy 88:310Google Scholar
  43. Liu YS, Su CW (2010) The relationship between the real estate and stock markets of China: evidence from a nonlinear model. Appl Finance Econ 20(22):1741Google Scholar
  44. Liu CH, Hartzell DJ, Greig W, Grissom TV (1990) The integration of the real estate market and the stock market: some preliminary evidence. J Real Estate Finance Econ 3(3):261Google Scholar
  45. Lou T (2017) Nonlinear causality relationship between stock and real-estate returns in PIGS countries: wealth effect or credit-price effect. Appl Econ Lett 24(11):736Google Scholar
  46. Mao G (2016) Do regional house prices converge or diverge in China? China Econ J 9(2):154Google Scholar
  47. Markowitz H (1952) Portfolio selection. J Finance 7(1):77Google Scholar
  48. Mihanović H, Orlić M, Pasarić Z (2009) Diurnal thermocline oscillations driven by tidal flow around an island in the Middle Adriatic. J Marine Syst 78:157Google Scholar
  49. Newey W, West K (1987) A simple, positive semidefinite, heteroscedasticity and autocorrelation consistent covariance matrix. Econometrica 55:703Google Scholar
  50. Ng EK, Chan JC (2012) Geophysical applications of partial wavelet coherence and multiple wavelet coherence. J Atmos Ocean Technol 29(12):1845Google Scholar
  51. Oikarinen E (2009) Interaction between housing prices and household borrowing: the Finnish case. J Bank Finance 33(4):747Google Scholar
  52. Okunev J, Wilson P, Zurbruegg R (2000) The causal relationship between real estate and stock markets. J Real Estate Finance Econ 21(3):251Google Scholar
  53. Peng XT (2011) Study on the correlation between the real estate market and the stock market of China. J Beijing Inst Tech (Soc Sci Ed) 13(5):39Google Scholar
  54. Perron P (1989) The great crash, the oil price shock and the unit root hypothesis. Econometrica 57(6):1361Google Scholar
  55. Phillips PBC, Perron P (1988) Testing for unit roots in time series regression. Biometrika 75:335Google Scholar
  56. Quan DC, Titman S (1999) Do real estate prices and stock prices move together? An international analysis. Real Estate Econ 27(2):183Google Scholar
  57. Shao F, Zhu DZ (2016) Under the new normal a relevant empirical analysis on real estate and stock market. J Shijiazhuang U Econ 39(3):11Google Scholar
  58. Shiller RJ (2014) Speculative asset prices. Am Econ Rev 104(6):1486Google Scholar
  59. Sim S, Chang B (2006) Stock and real estate markets in Korea: wealth or credit price effect. J Econ Res 11:99Google Scholar
  60. Su CW (2011) Non-linear causality between the stock and real estate markets of Western European countries: evidence from rank tests. Econ Model 28(3):845Google Scholar
  61. Torrence C, Compo GP (1998) A practical guide to wavelet analysis. Bull Am Meteorol Soc 79(1):61Google Scholar
  62. Tsai IC, Lee CF, Chiang MC (2012) The asymmetric wealth effect in the US housing and stock markets: evidence from the threshold cointegration model. J Real Estate Finance Econ 45(4):1005Google Scholar
  63. Wu WX, Qi TX (2007) Liquidity, life cycle and portfolio choice heterogeneity. Econ Res J 2(3):97Google Scholar
  64. Wu J, Gyourko J, Deng Y (2012) Evaluating conditions in major Chinese housing markets. Reg Sci Urban Econ 42(3):531Google Scholar
  65. Xu XE, Chen T (2012) The effect of monetary policy on real estate price growth in China. Pac-Basin Finance J 20(1):62Google Scholar
  66. Yao S, Luo D, Wang J (2014) Housing development and urbanization in China. World Econ 37(3):481Google Scholar
  67. Yilmaz A, Unal G, Karatasoglu C (2017) Wavelet based analysis of major real estate markets. J Adv Stud Finance 7(2):107Google Scholar
  68. Yuksel A (2016) The relationship between stock and real estate prices in Turkey: evidence around the global financial crisis. Cent Bank Rev 16(1):33Google Scholar
  69. Zhang G, Fung HG (2006) On the imbalance between the real estate market and the stock markets in China. Chin Econ 39(2):26Google Scholar
  70. Zhou X, Chang MS, Gibler K (2016) The asymmetric wealth effects of housing market and stock market on consumption in China. J Asia Pac Econ 21(2):196Google Scholar

Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  • Chi-Wei Su
    • 1
  • Xiao-Cui Yin
    • 2
    Email author
  • Hsu-Ling Chang
    • 3
  • Hai-Gang Zhou
    • 4
  1. 1.School of EconomicsQingdao UniversityQingdaoChina
  2. 2.Science and Information CollegeQingdao Agriculture UniversityQingdaoChina
  3. 3.Department of Accounting and InformationLing Tung UniversityTaichungTaiwan
  4. 4.Department of FinanceCleveland State UniversityClevelandUSA

Personalised recommendations