| By earning the two theoretical models — overvaluation hypothesis and rational expectation model, and reading a lot of literature, we split the pricing efficiency into two parts: price adjustment and response speed. Price adjustment is shown as cumulative abnormal returns; response speed is expressed by price lag indicators which we creation. In this paper, we focus on the expansion events of underlying stocks happened until 2010, and divide the research interval into three parts:pilot phase, normal phase and expansion phase. By using event study method and panel data results, and taking the underlying stocks and other stocks before and after introduced into the margin trading as the research objects, we reach the following conclusions:First, short-selling constraint makes stocks overvalued and hinder the respond speed of stocks to messages; Second, after introducing the margin trading, especially we are well into short-sale era, not only does the degree of overestimation of underlying stocks decrease, the respond speed of stocks to messages improves a lot.Results this paper has achieved provide overvaluation hypothesis and rational expectation model with proofs from emerging market. Margin trading not only perfects exchange mechanism, but also improve the pricing efficiency of underlying stocks. |
