Study On The Impact Of Change Of Interest Rate On Real Estate Stock Price

As a capital intensive sector, the real estate industry is intimately correlated with financial sector through capital flow.The Real estate stock market, as an integral part of financial market, remarkably contributes to allocation of resources, discovery of real value of assets and forecast of economy. The interest rate policy serves as a normal and most important instrument for macro-control of real estate industry. With significant influence on the consumers' confidence and purchasing power, interest rate affects consumption on real estate market. Also, interest rate affects investment on real estate market,because it has great influence on the cost of investment given that the majority of the capital flow on real estate market stems from bank loans.Using sophisticated economic theories and empirical methods, this paper intends to analyze the factors for the fluctuation of stock prices of real estate listed companies and the influence of interest rate on those prices. First, theoretically, we discuss the factors which affect the volatility of stock prices, such as, Macroeconomics, macroeconomic policy, performance of companies and etc. Because some factors involved are latent, identifying these potential factors turns out to be very challenging. Therefore, we draw on a new approach--Independent Component Analysis in attempt to complete this challenging work. As a result, the trend of stock market index and interest rate policy are two essential factors responsible for the fluctuation of stock prices of real estate listed companies. In addition, this paper analyses the relationship between the interest rate and real estate stock prices, the impact approach of interest rate and the effects of change of interest in both short and long run on stock prices. By the support from an empirical study, we come to the conclusion that the interest rate is adversely proportional to stock prices of real estate companies in long term, but imposes a short run impact on it with a lag. Also, in order to achieve the healthy development of real estate markets, the following aspects are necessary to be highlighted in future relevant policies: supply control, demand guidance and anti-manipulation supervision.