Empirical Research on the Relationship between Real Estate and Stock Price Fluctuation in China Based on VAR Model

In recent years, China has experienced high real estate price and stock market fluctuations. It is necessary to study the relationship between real estate and stock price in order to promote healthy and stable development of the economy. Based on data from 1999 to 2009, this article empirically explored their relationship by multivariable VAR model under the situation of taking currency liquidity as endogenous variable. The results show that there is a long-term equilibrium relationship between real estate and stock price in China, and they are the Granger reasons for each other. In a short-term, real estate price changes at the same direction as stock price fluctuation caused by one standard deviation innovation, while stock price changes at the adverse direction of real estate price fluctuation caused by one standard deviation innovation. The variance decomposition analysis suggests that the contribution of real estate price to forecast mean square error of stock price is less than that of stock price to forecast mean square error of real estate price.