The Study On Securities Lending System And Volatility Of Stock Market

The study on the relationship between securities lending system and volatility of stock market is an important study field. Recently, the Chinese stock market has given up the forbidden on the short-sale system and agreed the innovational security companies to develop securities lending transaction. However, many studies discover that the Chinese stock market has the characteristics of strong persistence, volatility clustering and asymmetry. So"what will happen to the volatility of Chinese stock market if securities lending system has developed"is the quite question that this paper wants to solve. Meanwhile, it has great practical significance.To examine the relationship between securities lending system and volatility of stock market, the paper applies the datum of securities lending transaction and monthly standard deviation of Hong Kong H shares index, and uses co-integration test and Granger causality test to do empirical analysis. The result shows that there exists positive correlation but no co-integration relationship between fluctuation of H shares index and short-sale transaction, the change of short-sale transaction is not the Granger cause of fluctuation of H shares index, however, the change of fluctuation of H shares index is the Granger cause of short-sale transaction under the 10% level. It also means that the development of short-sale transaction will not cause high scale fluctuation of the stock market. Oppositely, it makes the market more stable.On the base of the empirical analysis result, this paper further studies the present fluctuation of Chinese stock market and the negative influence that aroused by the lack of securities lending system, and finds that it's necessary to develop the securities lending system in order to stabilize the stock market, and from the market size,supervising strength and practical experience, the market has enough abilities to develop this system. At the same time, securities lending system also enlarges risks to the market, for decreasing and avoiding these risks, we also give some constructive advices.