| In China, margin trading and stock market index futures are the main forms of short selling. This paper discusses the short trading mechanism from these two aspects.In2010, margin trading and stock market index futures are permitted into market in China, which ends the long-standing deficiencies in stock market caused by unilateral trading system. This move is considered as a solid step forward for improving Chinese security trading system.Short trading has grown mature in developed capital markets and some emerging markets。After the oil crisis in1970s, the stock markets in western countries suffer huge fluctuations. In this context, short selling, which is now so-called margin trading is introduced to meet investors’needs for risk avoidance. Learning from foreign experience, Chinese government authorizes margin trading in31/03/2010, with full consideration of the characteristics of domestic capital market.A stock market index future is a future contract on the value of a particular stock market index. The future on Chinese stock market index is not firstly traded in this country. As early as2004, the Chicago Board Future Exchange, a wholly owned subsidiary of Chicago Board Options Exchange (CBOE), issues CBOE Chinese stock market index futures on a weighted average portfolio made of16stocks based on their U.S. dollar equivalent market value, including China Aluminum Industry, China Telecom, China petroleum, Sina and so on. In2006, FTSE Xinhua Index Ltd, one of the biggest four global index companies, introduces FTSE China A50Index, which contains the50largest market capitalization companies in Chinese A-share market. In the same year, Financial Futures Exchange is established in China; and emulation trading on CSI300index futures is launched in October as a rehearsal for the beginning of official trading. After three years of preparation, in16/04/2010, stock market index future finally comes into market.Based on empirical research, this paper tries to solve the following questions: after short trading mechanism coming into run for four years, whether market volatility has been stabilized? Whether market liquidity has been boosted? Whether assets pricing has been proper? Whether it has live up to price discovering function? To compare the real consequences and effects with the expected vision enables government to improve and complete regulatory system on stock market, reduce market volatility, enhance liquidity, thus promoting stable and healthy development of stock market.Short mechanism has being running for nearly four years, whether it has played its proper function? In this paper, these issues are discussed, the main content and conclusions include:part1proposes the background of the research including the appearance and development of short mechanism; describes the value of the research grounded on the theoretical and practical significance; based the research on the theoretical elaboration and empirical research; and put forward the general framework and main content.Part2is divided into three sections:the impact of short mechanism made on market liquidity, volatility and price formation.In part3, the author first defined the short and short mechanism which in our country includes two short transactions, that margin trading and stock index futures; then introduces three classic margin and trading modes. namely the United States mode on behalf of the decentralized credit model, Japan mode representing the monorail-centralized credit model and China Taiwan mode---dual-centralized credit mode.In part4, we use daily data after2008of the CSI300index price and the amount of financing and margin to find the outcome applying descriptive statistics method and Garch models. The results show that the introduction of margin trading will help reduce market volatility.In part5, the author primarily concludes that margin and trading do increase the liquidity of the stock market based on the VAR model. Trading transaction demonstrates a stable and durable impact on liquidity while margin transaction performs the opposite.In part6, this paper advanced two main price-discovery model, P-T model and I-S model, finding that the stock index futures’price-discovery function can be initially apparent.Part7summaries all the conclusions made above, based on which the author proposes four political suggestions.This paper has following highlights. First, based on theoretical analysis on the definition, function and characteristics of short mechanism, time series econometric model is used for in-depth study on short mechanism in China. Second, empirical research is conducted in various approaches. This paper examines the effects of short mechanism from three aspects:regarding liquidity, volatility and assets pricing. And econometric models of ARCH family including GARCH, EGARCH, GARCH-M and TGARCH, are compared to determine the most suitable model. Last, two relatively new models-Permanent transient model and Information share model are employed in the study of the assets pricing function... |
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