China's Stock Market Wealth Effect Study

The stock market is one of the important parts in modern financial market. Generally speaking, the main function of the stock market is finance and resource distribution. However, with the enlargement of the stock market, there is still one function that can't be neglected, and that is policy transmission. According to the change of the stock price, the monetary policy of Central Bank has an influence on the real economy. The effects include Q value effect, non- symmetrical effect, the wealth effect and liquidity effect. This thesis provides an overview on wealth effect in stock market.The wealth effect means the fluctuation of the wealth amount and the change of its part will influence consumption and investment demand, and then the influence the economy. The change of balance of the circulative value of stock market and its influence can be called the wealth effect in stock market. In order to provide the basic insight into the evolution of wealth effect in actual stock market, the thesis tentatively constructs a new theoretical framework, through which the thesis makes a profound research on the wealth effect in the background of interactive-relation between stock market and economic growth. This thesis provides a compact yet comprehensive overview of wealth effect in stock market, based on Macroeconomics and modern financial concepts. By constructing theoretical models and making academic analysis, practical demonstration, case study as well as countermeasure research, the thesis not only describes the intrinsic mechanism and the external trend of wealth effect in stock market, but also provides some scientific basis and policy suggestions for development and regulation of wealth effect in China stock market.The main logic structure of this thesis is: the concept of wealth and wealth effects, on which the analysis of wealth-effects-acting-on-economy mechanism and its dissymmetric effects on economy are based, must be mentioned before the wealth effects of stock market are studied. Then through studying on US stock market's wealth effects, this thesis analyzes and makes a practical demonstration on the practical condition and problems of the Chinese wealth effects and proposes some policies and suggestions on it. After arguing the relation between wealth effect in stock market and monetary policy, the thesis suggests a transitional strategy to regard the wealth effect as the stock market policy instrument in our country. There are five chapters of this thesis. The first chapter generally describes the relevant theories of wealth and wealth effects. The difference of quantity, constitution and concentration of the wealth can induce different consuming behavior of families, so it's necessary to study on the essence and classification of wealth. After that, the author reviews on the theoretic origin of wealth effects and indicate that traditional wealth effects are reflection on modern stock market induced by wealth effects of monetary balance. Afterwards, it analyses the psychological reasons of wealth variety of stock market influencing on consumption based on behavior finance. The second chapter analyses the effects of stock wealth on economy. Wealth effects are closely related to consumption demand. Researching on wealth effects starting from consumption demand function can evade the deficiencies of quantitative analysis and establish a general model of wealth effects acting on economic growth. First of all, it analyzes the function of wealth effects through permanent income theory and life cycle theory. Then, it annotates the function principle of positive and negative effects of stock through LC-PIH model. Besides, it further discusses the conducting mechanism from the point of influence of stock market wealth effects on consumption and investment. At last, it analyzes the cause of positive-negative-effect's dissymmetric effects on economy.Chapter Three probes into the restriction factor of wealth effects of stock market through the cases of U.S. American stock mar...