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The Impact of Real Estate Equity Investment of Productive Enterprises on China’s House Price Foam: Based on the State Space Mode

Author(s)

Fang Liu*, Shanshan Guan

Affiliation(s)

School of Finance, Shandong Technology and Business University, Yantai, Shandong, China *Corresponding Author.

Abstract

Based on the state space model, with the macro data of residential housing price, housing rent, land price, interest rate, consumer price index, nominal exchange rate and GDP, this paper measures the quarterly data of China’s real estate price bubble in 2007-2016. We construct a theoretical model, analyze the theoretical mechanism of the impact of real estate equity investment behavior of production enterprises on China’s housing price bubble, and then use the long-term equity investment data of non-financial non-real estate listed enterprises (ie, productive enterprises) investing in the real estate industry, to empirically test the impact of equity investment on China’s housing price bubble, which is invested by production enterprises to real estate. The study found that: (1) After relaxing the “random perturbation” hypothesis of the housing price bubble, the average price of the house price bubble based on the state space model is not zero, which is consistent with the actual situation of the current real estate price in China; (2) The long-term equity investment of the production enterprise in the real estate industry extends the financing chain of the real estate enterprise, which increases the financing cost of the real estate enterprise, and finally raises the real estate price bubble level.

Keywords

Productive Enterprises; Capital Flows; Long Term Equity Investment; Capital Flows; House Price Foam; State Space Model

References

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