The Effect Of Short Selling On China's Stock Market

After several years of careful preparation, China's stock market finally came to its own mechanisms for short selling-Margin Trading, it's a milestone for China's capital market. The offer of short selling changes the situation that investor only do going long in this market for a long time. On China's securities market will also have profound impact. For this reason, this research can be out of the past as a spectator, but be in a "witness" point of view, takes China's Shanghai&Shenzhen Securities market as research object, studies the short selling impact on the market from the following two aspects:the influence of short selling on the price discovery and the effect of short selling on market liquidity and volatility.This paper first reviews both the domestic and foreign research on short selling. Secondly, this article analyzes the impact of short selling on price discovery and market liquidity and volatility from both theoretical and empirical perspective. There two conclusions of this paper,(1)Short selling has a significant negative impact on stock price, that is,short-sales tends to cause the stock price drop;(2) the influence of mechanism of short selling on market liquidity and volatility was not significant. Finally, according to the study findings and research results and combining the overall market environment, this article proposes some policy suggestions.