An Empirical Study On The Impact Of The Volatility Of Stock Returns To Chinese Residents’ Savings

Abstract:The issues of by what factors the Household savings in China can be influenced and in what degrees it being influenced, in recent years, have turned out to be the interesting and hot topics by researchers. Recently, some researchers have put focus on the household savings influenced by stock returns volatility and gotten some significant findings. there are some great changes. For the first, the stock market enlarges, IPO continues actively and GEM is listed consistently. For the second, the stock market comes across sustained downturn and the fund shrinks seriously. For the third, real estate market has been on the rise since2005, which results in the residents actively invest in real estate industry. And for the last, over the years the CPI has been at a high rate. Thus, people began to feel the inflation pressure.In the present paper, the factors affecting the household saving rate and residents’ assets choice tendency is analyzed, and it builds the relation model further. By collecting and sorting a large number of longitudinal data of stock market, the CPI, interest rates, household savings, it made an empirical analysis on the effect of stock returns volatility impact on residents savings. At the sametime, by considering the stock investment behavior of the urban residents more outstanding, it made a further empirical analysis on the effect of stock returns volatility impact on the urban residents savings. Because the massive increase in stock is in sync with the decline even negative growth of the residents savings rate in2006and2007, so we do a supplementary analysis of the monthly data in this special period. The findings are as following:(1) When the stock market rose sharply, the stock market has attracted some residents savings into investment shares, which makes deposits increase reduce and shunt of bank deposits in part; however In the stock market downturn and the stock fell sharply, some risk averse residents get away from the stock market. Therefore their money transfer to bank or switch to real estate, which make resident savings increases obviously.(2) Most residents, only when the stock market rise or fall in a quite long period, which means in the trend of great change, will change its behaviors of stock investment and saving, like reducing savings into the stock market, or reduce investment and transfer to bank. Short-term volatility may have little impact on the residents’ savings balance changes;(3) The positive fluctuation of stock returns has a negative influence on the residents savings deposit rate. And the negative fluctuation of stock returns has a positive influence on the residents savings deposit rate. But, the change sensitivity to residents’ deposits is much less than the interest rate, per capita disposable income and the inflation rate. This empirical study shows the results that according to the influence degree, from the most important to the less, the affecting factors of household savings are nominal interest rate, per capita disposable income growth rate, the rate of inflation, Shanghai closing index change rate and growth rate of per capita expenditure on social security. And the household savings is still considered to be the safest choice for financial assets.(4) Compared to the empirical analysis with monthly data, there is a significant rising of correlation between Shanghai closing index monthly change rate and urban residents’ monthly deposits, due to the great fluctuation of the increase in stock index and decrease in savings in monthly data.