The Relationship Between Margin And Stock Returns

Our country’s financial market started margin trading for three years. The margin trading volume increases very soon. Until the February of2013, the uncovered margin purchase reaching130billion, the uncovered short selling reaching3.7billion. The margin trading changed the market environment. The investors have much more choices than ever before. How margin trading influence the market. How it change the investors’behavior.The margin trading makes investors more unseasonable, or the margin trading system working out. It is a quite interesting question. This paper discussed three problems. The first, what’s the relationship between margin trading and stock daily return. The second, what’s the securities that investor much more prefer. The last but not the least, the investor make profit much better than market average level or not. From the researching of the data last two years, I found that the growth rate of margin purchase and yield of the stock is a negative correlation, margin shorting growth is inversely related to the yield of the stock. From my study, the investors prefer higher beta stocks than lower risk security. The third, the investor who do some margin purchasing or short selling stocks don’t performance better than the market average. If we think of the finance fees, the investors’ performance is worse than the average.