The Effect Of Welfare From Chinese Stock Market

This paper studied the welfare of the investors、the public corporations and thegovernment which are the three main participants in China’s stock market.We will through two aspects to study the economic welfare of the investors. Firstbased on the utility space, we will use the HARA（Hyperbolic Absolute RiskAversion）function to deduce the utility function about the risk lover、risk-neutral andrisk-averse, and manage the three types investors welfare during the price’sup-and-down. The study shows that, the increasing absolute risk-averse investor’sutility will reduce, in other words their welfare will worsen when the price rise up andthe probability of the price move down become large if the investor do not sell theirstocks; contrariwise, the investors welfare will be improved. The situation of thedecreasing absolute risk-averse investor is opposite to the increasing absoluterisk-averse investors’, the welfare of the constant absolute risk-averse investor hassomething to do with the change of the stock price Second, we find that the welfare ofthe investors as a whole will be improved during the bull and will be worsen duringthe bear based on the expected return and variance space.As to the welfare of the public corporation, we focus on the financial system andthe change of the financial structure. We find that when the bank industry monopolythe supply of the financing channel, it will increase the financing cost of thecorporation and reduce the economic welfare of the public corporation. Thedevelopment of the stock market make the financing channel more, and it couldimprove the economic welfare of the corporation. But what the problem is that thepublic corporation cannot get as much money as they need from the stock market tomaximum of their economic welfare, because it is leashed by the economic situation.After the analysis of the welfare effect about the government, the outcome showsthat the function of the financing is the Granger causality of the GDP growth. Itproves that stock market contribute the change of the money from stock market toinvestment field to hasten the speed of the economy. This argument has beenvalidated by the quantitative analysis based on the C-D model. In addition, we havenot found that the stock market have significant effect on the consumption, it meansthat our stock market have little wealth effect, and the government cannot get someeconomic welfare count on the stock to increase consumption. What we can makesure is that the government had got much stamp tax from the stock market, during1993-2010, the investors have paid more than641.179billion.