Stock Market Wealth Effect On Chinese Consumer Market

With the open-up policy of China, Chinese stock market develops in a high speed. Actually, Chinese investors face the challenge to decide which stock they should invest according to the changeable information about stock market. As a result, stock market wealth effect catches our eyes and has a more and more huge impact on consumer market.The existence of wealth effect on western stock markets has been proved because of their maturely running. However, Chinese stock market is still in developing phase so that the researches of the wealth effect are just ongoing. Fortunately, practice of other countries in this respect has provided abundant reference experience for us. Based on that, Chinese economists make lots of hard work and deep study but can't help having arguments.The explosion of the sub-prime mortgage financial crisis in America shocks the whole world. After that, how to stop the downward trend of economy and taking advantage of stock market wealth effect becomes the hottest issue. This paper aims to catch the core of this problem and find the way to get rid of the negative wealth effect on consumer market under the current situation.Giving a theoretical description of the whole background about stock market wealth effect becomes the first part, which is also the foundation of the whole article. In this part, we define the relevant concepts of the wealth effect. Secondly, we describe the international background and the domestic background to get a general picture of the researching results till now.Then, in the following chapter, we systematically analyze how stock market wealth effect gets an access to make an impact on consumer market, mainly by three theories. Especially to say, the positive effect of stock market wealth is not as the same big as the negative effect when they change the same margin. So the S model and other theories are used to explain this character of wealth effect clearly.The fourth chapter is based on the third chapter, which uses empirical study with data from 2006 to 2008 to demonstrate whether stock market wealth effect does exist in China. We analyze the empirical result to find the causes in deep level. And the final suggestions and strategies are out when we unveil the key to the riddle.Finally, theoretical and empirical analysis, as well as cross-national practical comparison, helps us to solve this problem "why the wealth effect in Chinese stock market is so week". Simultaneously, we also make some suggestions on how we should improve the immature stock market and enlarge the coverage of positive wealth effect in order to embrace a brighter future for China.