The Effect of House Price on Stock Market Participation in China: Evidence from the CHFS Microdata

ABSTRACT

This is an empirical study on the effect of house price on stock market participation and its depths based on unique China Household Finance Survey (CHFS) data in 2011 and 2013 including 36,213 sample households. We mainly found that, with an increase of one thousand RMB per square meter in macrohouse price, the probability to participate in the stock market will increase by 5.4% before controlling for wealth effect and 2.84% afterwards, indicating the existence of wealth effect. The participation depths of the stock-total asset ratio are expected to decrease by 0.23%, and absolute stock asset is observed to decrease by 5.8 thousand RMB in response to one thousand RMB increase of per square meter house price. The effect of house price on participation decision is also related to housing area, and the negative effect of house price on stock market participation depths gets more intense with the increase of the stock-total asset ratio.

KEY WORDS:

• CHFS data
• China
• house price
• participation decision and depth
• stock market

Acknowledgments

Xiaoyu Chen joined the China Household Finance Survey (CHFS) in the summer of 2015 and gratefully acknowledges the direction by Professor Li Gan.

Funding

The authors thank the financial support from the Deutsche Forschungsgemeinschaft via CRC Economic Risk and IRTG 1792 High Dimensional Non Stationary Time Series, Humboldt-Universität zu Berlin.

Additional information

Funding

The authors thank the financial support from the Deutsche Forschungsgemeinschaft via CRC Economic Risk and IRTG 1792 High Dimensional Non Stationary Time Series, Humboldt-Universität zu Berlin.