Margin Impact On China's Stock Market Volatility And Liquidity

Securities margin trading as a new trading system, will affect the supply and demand of the stock, and thus have an impact on the stock market volatility and liquidity. But what is the influence of margin trading on stock markets? Whether it plays a promote role or inhibition? Is the impact on financing trading more apparent than that on margin trading? On these issues, whether theoretical or empirical, academia and industry insiders have different ideas. In view of this, the paper firstly finishing analysis of relevant literature about margin trading, then explores the direction for further research and ideas; Secondly,, the paper made a detailed analysis on the concept of margin trading, trading patterns, the influence factors of market volatility and liquidity, as well as the influence mechanism between margin trading and the stock market; Then on the basis of the current situation of margin trading, the paper selects Shanghai and Shenzhen stock market as the research objects, and uses the VAR model, Granger causality test, impulse response functions and variance decomposition method, to make Empirical Analysis of the relationship between the margin trading and stock market volatility and liquidity. Finally, combined the empirical results and the actual situation of China’s stock market, we proposed several development recommendations, such as implementing and perfecting market-based refinancing mechanism, improving securities regulation, expanding the size of the margin trading business, improving the company’s internal system.The main conclusions of this article are as followings:(1) Financing and margin trading has played a certain degree of inhibition on the volatility of the stock market, but with the passage of time lag, The strength of this inhibition is changing constantly.(2) Margin trading has no significant effect on liquidity of the stock market.