Font Size: a A A

The Effects Of Securities Margin Trading On The Quality Of Securities Market

Posted on:2014-01-24Degree:MasterType:Thesis
Country:ChinaCandidate:X M GuFull Text:PDF
GTID:2249330395982953Subject:Finance
Abstract/Summary:PDF Full Text Request
Securities margin trading is widely used in developed financial markets. In theory, securities margin purchase and short selling can increase liquidity of securities and reduce volatility. Margin trading will bring earnings to securities brokers, and will be helpful to construct a multi-layer securities market. On the other hand, securities margin trading will amplify the capital dimensions and enlarge the market risk. In the paper, monthly data of underlying stocks and matched stocks from March,2010to September,2012is used as research sample, with t test and the cross-sectional regression analysis method, to analyze the effects of margin trading on volatility and liquidity of securities market.With t test, there is no sufficient evidence to show that securities margin trading affects the volatility and liquidity of securities market significantly. This result may due to the small size of margin trading and the existence of other factors which may affect volatility and liquidity of securities. When controlling other factors, and with the cross-sectional regression analysis method, significant effect of margin trading on volatility and liquidity of securities is found. After the introduction of margin trading, the volatility of underlying stocks decreases significantly. The net volume of securities margin purchase is negatively related to the volatility of underlying securities significantly. But the short selling can both exacerbate and reduce the volatility of underlying securities. The total effect of margin trading on volatility of securities is consistent with the effect of margin purchase on volatility of securities. After the introduction of margin trading, the liquidity of underlying stocks increases significantly. The net volume of securities margin purchase is positively related to the liquidity of underlying securities significantly. But the short selling can both enhance and reduce the liquidity of underlying securities. The total effect of margin trading on liquidity of securities is consistent with the effect of margin purchase on liquidity of securities.
Keywords/Search Tags:Margin trading, Volatility, Liquidity, Cross-sectional regression analysismethod
PDF Full Text Request
Related items