An Empirical Research About The Impact Of Margin Trading On China’s Security Market’s Volatility Based On The SSE50Index

Margin trading is one of the basic operations in the mature securities markets, which has already existed and developed for many years. China’s securities market introduced this trading mechanism in2010, and this act was regarded as another milestone in China’s securities market development history. Chinese investors are finally able to do credit transactions.However, what effect will the margin trading bring to China’s securities market has been a widespread concern. This issue has not been determined in world-wide researches. Some studies suggested that the margin trading increased market volatility, and some fond that it can play a role to stabilize the market in the contrary. The answers are different in different historical stages of the securities market, and also different in different securities markets. During the financial crisis in2008, the U.S. stock market experienced a collapse which was exaggerated by short selling, which even lead to the collapse of a large number of financial institutions, leaving a far-reaching impact. This aroused international criticism on short selling mechanism. Margin trading is like a double-edged sword. How to carry out this operation in order to play to their strengths to the maximum extent while avoiding its possible adverse effects, this is a question worthy of study.After three years of operating experience, and now this article is trying to figure out the impact of margin trading on China’s securities market’s volatility. Since the volatility of the market’s main stock index yields is a good representative of the market volatility, and the SSE50Index securities involved in China’s margin trading from the very beginning, this article is going to analize the impact of margin trading on the volatility of SSE50Index yield as an entry point. Through a general overview of the current research and the related basic theories, this article uses China market’s transaction data in empirical methods to find out the fact and try to give a conclusion and related recommendations. Based on the methods and results of previous studies, this paper uses a widlly accepted model when dealing with financial time series data, the GARCH model, to do the empirical research on China’s implementation of margin trading impact on the SSE50Index yield fluctuations. In order to fit the facts, the model was revised a little to get a more precise result. Finally the results show that China’s securities market margin trading does not significantly affect the market volatility, which is likely to be due because of the size of the margin in China was still too small to make a difference. In addition, the empirical results-show that after China’s securities market introduced in margin trading trasaction, prices reflect the the new unexpected information faster while also had a longer memory e’ffect. In general, the market price react to the new information faster, so market efficiency increased after introduced margin trading.