Dynamic Linkages between China’s Stock and Real Estate Markets: Substitution, Wealth, and Spillover Effects

Based on quarterly data for Beijing, Shanghai, Guangzhou, and Shenzhen from 2007Q1- 2023Q1, this study examines the dynamic linkages between China’s stock and housing markets through substitution, wealth, and liquidity mechanisms. Using ADF tests, Johansen cointegration, a five-variable VECM, Granger causality, and orthogonalized impulse-response functions, we identify both long-run equilibrium and short-run interactions. Housing prices show strong persistence across all cities. The substitution channel is weak, with a short-run stock→housing effect only in Shenzhen. The wealth channel (disposable income) is generally positive or insignificant, while the liquidity channel (deposits) is limited and concentrated in Guangzhou. CPI depresses housing prices in Shanghai and Shenzhen, suggesting a price-constraint mechanism. Granger causality patterns differ by city, and the results remain robust when replacing SSE with SZSE.