Empirical Study On The Relationship Between Assets And Liquidity In China

After recalling the theory of stock price determination, real estate price determination, and liquidity theory, this paper tries to find out the main factors which impact the price of stock or real estate. The three levels of the money supply are used as liquidity indicators in the paper.In order to find out the main factor, the paper runs a regression between the asset prices and the factors. It concludes that, the stock price is affected by the macroscopic factors, and is crutched by the liquidity. It also concludes that, the liquidity, land price, consumption, and rent together force the real estate price to rise.On this basis, the paper works over how liquidity affects the stock price, using Granger Causality Test. The conclusions are, in China, the buildup of liquidity impels the rise of stock price. And in the meanwhile, the rise of stock price changes the gross and the structure of liquidity in turn.As to the real estate price, the paper runs Mixed Data Sampling Regression Model and Error Correction Model. The paper indicates that, the changes of gross money supply can affect the rise of real estate price rapidly, and is sensitive to the changes of the gross money supply, which demonstrates that, the rise of real estate price keeps the rise of consumption.At the end of the paper, there are a few suggestions. First, the government should increase the income of low-income residents, and guide residents to establish reasonable consumption idea. Secondly, an expansion of the stock market is needed. Thirdly, the government should guide the funds into real estate market correctly through tax means. Last but not the least, to triage excess liquidity, a multi-level financial market should be developed.