Wealth Effect of Stock Market:An Interpretation and Verification Based on LC-PIH Hypothesis

摘要

The permanent income hypothesis and the life-cycle hypothesis can respectively explain the wealth effect of stock market to some extent.This paper believes that the LC-PIH hypothesis can interpret the effect better.Once the stock market is booming sustained,the positive wealth effect will come into effect,which will increase the wealth of investors and their better expectation of economic growth,stimulate the social consumption to go up,enlarge the short-term marginal propensity to consume,and then yield the economic growth.If the stock market were recessive,the negative wealth effect would come into effect.Our result shows that the wealth effect of stock market in China doesn't perform well because of several restricted factors.1