Research On The Influence Of Margin Trading On The Volatility Of China 's Securities Market

Margin trading was officially launched in China on March 31, 2010, which is a major reform of the stock market trading system. It makes the development of China’s securities market entering a new stage. And it was a milestone time in China securities history. With the margin trading expanding, the pool of the underlying securities enlarging, the proportion of the market value increasing, it increasingly plays a significant impact on the stock market. However, what influence does the margin exert on the stock market,especially for volatility, has been one of the focus of debate topics in the theoretical and practical circles and is still on discussing.After four 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 SZSE Index securities involved in China’s margin trading from the very beginning, this article is going to analyze the impact of margin trading on the volatility of SZSE Index yield as an entry point.This paper, on the basis of combing the existing literatures, first classified of domestic and foreign scholars of various expositions for impact of margin trading on the stock market volatility, and this classification laids a theoretical foundation for this paper. Then, we summarized the concept, characteristics and course of development of margin trading, and compared with our current margin trading system, analysised of the possible direction of development of the margin trading system combined with China’s actual situation. And then his article is trying to figure out the impact of margin trading on China’s securities market’s volatility with theoretical and empirical method. In the theoretical part,this paper introduced its influence on the volatility of stock market mechanism both in margin trading and securities lending transactions. In the empirical works, we select the actual data of margin trading of China’s stock market by adding adummy variable in the variance equition of the GARCH model. Study found that the two time periods of the pilot stage and the regular stage of margin trading, market volatility levels changed significantly, and there is reason to believe that the introduction of margin trading is one of the reasons that causing this change, but the market volatility decrease was not obvious. The reason is the present of China’s margin trading mechanism is not perfect, the transaction threshold is high and the transaction closed up rules, and the scale of margin trading market in total transactions is very small, so the index return volatility have no significant effect is understandable.Finally, according to previous studies and this article, This paper puts forward countermeasures and suggestions of promoting the steady development of China’s margin trading from regulators, securities companies and investors, to make it play a positive role in margin trading mechanism. At the same time,points out the deficiency and research prospects of this research.