An Empirical Study Of The Influences Of Margin Trading On The Stock Market Quality

In the western mature capital market, securities margin trading is a regular businesses. But it remains a new thing in our stock market. In November25,2011, Shanghai Stock Exchange issued the "Shanghai stock exchange margin trading rules", it means that the securities margin trading become a regular activities. In August30,2012, Refinancing business has been started. Investor expressed a strong interest in this business. Refinancing business expand the resource of stock and money to the margin trading. And make the margin trading become more mature. As the increase of scare and participation, the effect of margin financing business on the market become more and more significant. It remains to be seen how it will work in practice. In the background, we introduce the margin trading at first. Then analysis the mechanism of the short purchase and the short sell on the market volatility and liquidity. We select trading data and use the "VAR model","Granger causality test","Impulse response function","Variance decomposition", combined with literature research method to analysis the effect of business. We found that margin trading had effect on the market volatility and market illiquidity. It consistent with our hypothesis. From the result of Impulse response function, we know the effect is not play immediately. Our research results show some difference from the predecessors. The reason may be the increasing of scare and participation in our market. Secondly, we describe the effect on the underlying stocks. We found the business had the same effect on underlying stocks. In the end of the paper, we put forward some suggestions about it.