An Empirical Study On The Influence Of Margin Trading Business For Price Discovery Of ETFs In China

Exchange traded funds (ETFs) are made of the same stocks of the index they track. It is a collection of stocks (or sometimes other assets) that is prepackaged in a way to follow a certain market, industry, or commodity. Since the ETFs takes general exposure to the stock market without a high level of risk, costs, or complications, it has been developed rapidly in the last two decades. The first domestic ETF, SH50 ETF was created in 1993 by tracking SH 50 index.Base on the Time-Series Analysis Theory, this thesis makes an empirical study on the influence of the official launch of the margin trading business for price discovery of Exchange traded funds (ETFs) in china. The thesis make an research on the lead-lag relationship between the ETF and it’s tracking index by using the Vector Error-correction Model, Granger Causality Text, Impulse Response Function and Forecast Error Variance Decomposition. Consider the reasons of liquidity, size, maturity, we select three most respective ETFs——SH50 ETF, SZ 180 ETF and SH180ETF.Compared the difference between the price discovery of ETFs before and after the official launch of the margin trading business, we can conclude that:the official launch of the margin trading business can improve the leadership of the price of the ETF. The price of SH50 ETF has the most price discovery ability between the three ETFs.Finally, this thesis analyses the reasons of the conclusions of the empirical study, and suggest several proposals about the development and innovations of the ETFs in the domestic securities market.