Correlation Between The Net Balance Of Margin Trading And The Price Of Underlying Securities

This paper applies extensive data of variation rates on margintrading balance and the yield of CSI300ETF on studying the correlationbetween net balance of margin trading and the yields of underlyingsecurities respectively in overall period, strong market and weak marketscenarios. Quantitative methods as co-integration and Granger causalitytest are applied in the empirical study. Results of the study indicate that along–term stable co-integration relationship exists between the yield ofCSI300ETF and variation rates on margin trading balance. Meanwhile,empirical test of the overall period scenario shows that the yield of CSI300ETF yield is the Granger cause of the variation rate on margin shortselling balance, which is consistent with the finding that the variation oftrading volume lags behind the stock yield. However, the results of weakmarket scenario indicates that the variation rate of short selling balanceis the Granger cause of the yield of CSI300ETF, which proves that the balance variation of short selling has become a casual factor on the stockperformance during the weak market scenario.