The Research On The Relationship Between Margin Trading And The Stability Of Stock Market In China

The relationship between the margin trading and the stabilization of stock market is a hot issue which is always discussed among theorists and practitioners, in order to provide theoretical and practical support for our margin trading, In this paper we choose the margin trading concerning Chinese stock market as study object, deeply, rigorously and systematically analysis the relationship between the margin trading and the stabilization of stock market. As the gradual development of Chinese margin trading experiments, the margin trading has a great effect on the stock market, which makes it an important indicator for regulators and dealers. Hence the research on the margin trading and the stabilization of stock market has both academic and practical value.First, we introduce literatures about microstructures of security market and researches on the margin trading and the stabilization of stock market;Secondly, we refer to some basic knowledge about the margin trading and the details analysis of the developed margin trading market, analysis deeply the mechanism how the margin trading impacting the stock market volatility, and provide theoretical basis for the test of the margin trading and the stabilization of stock market;Thirdly, in the basis of theoretical summary, we select the Shanghai stock market index 50 as the indicator of the stabilization of stock market, use VAR model to analysis the influence on the margin trading for stock market volatility, and present a view how the margin trading effecting the stock market if the margin trading is confirmed;Finally, we give some brief policy advices. The conclusions of this paper:The analysis of the margin trading development effects on the market fluctuations indicates that the margin trading increases the volatilities of stock market but the influence is little. Using the Shanghai stock market price from April 2010 to March 2011 as sample data, we test empirically the effect of the margin trading on the stock market volatility.In this article we use the VAR model, VAR equation, Granger causality test, impulse response, and variance decomposition to test whether the margin trading in the Shanghai stock market stabilizes the stock market. At the same time, we obtain that the market fluctuations is the reason of financing trading and securities lending is the reason for the volatility of stock market from the Granger causality test based on the VAR model, which under 10% confidence level. It means investors can decide whether to make the financing trading by the analysis of the stock market fluctuations in the short term. In the mean time, the fact that the variance of securities lending trading can faintly increase the stock market volatility means under the single stock market, the investment environment is speculative, irrational and suspected for the short sales. It also means the functions of securities lending are limited. The results of the test show that the margin trading can't stabilize the stock price, but increase the stock market volatility although the effect is few and limited.