Research On The Price Discovery Function Of Margin Trading: An Empirical In Mainland Of China

With the continuously opening of margin trading market in mainland of China,its impact on the market has become a common problem in academia. Currently,related literatures are rare and most of them are researches abroad. Now, relatedstudy abroad is relatively mature, which in our country is converse, especially in theempirical side. This mainly due to the margin trading in mainland of China onlyexperienced a short time, which cause there isn’t enough data for related research. Inresponse to the situation, this paper mainly has a research on the price discoveryfunction of margin trading in mainland of China market from the empirical version.Based on event study method, the study analyses the abnormal returns andcumulative abnormal returns before and after the event day to test the price discoveryfunction of margin trading in mainland of China from the perspective of theadjustment of number of stocks on the margin trading list. Simultaneously, this paperconducted a rigorous empirical design to test the scale effect, market effect,announcement effect and refinancing effect on the price discovery function of margintrading by analyzing large amounts of data in the margin trading market in ourcountry respectively. And it has a conclusion that the price discovery function in ourcountry is complicated, especially the short selling in our country is more of a short-term speculative trading, rather than a kind of transaction based on the rationalexpectations on the market. Meanwhile, the price discovery function of the margintrading in mainland of China has obvious market effect, announcement effects andrefinancing effect. The effectiveness of the two model of event study method, marketmodel and market-adjusted model respectively, is also be examined in this paper,which illustrates that market model is relatively more effective in mature markets andmarket-adjusted model is relatively more effective in less maturely markets.In general, this study hopes to test the price function of margin trading inmainland of China by analyzing large amounts of data as well as empirical research.On the same time, the paper hopes to provide a reference for the subsequent academicresearch in related fields.