Study On The Influence Of Margin Trading On Chinese ETFs’ Volatility

Chinese securities market has launched margin trading mechanism for more than four years. Scholars are arguing whether margin trading mechanism can push the development of Chinese securities market. They doubt the ability of margin trading mechanism to promote the smooth operation of Chinese securities market. This question has not reached similar consensus. It starts from the perspective of the Chinese ETFs, using daily ETFs trading data and margin trading data to research the change of the Chinese ETFs after launching margin trading mechanism. It draws on the analysis of margin trading mechanism’s impaction on the stock market, selecting two Chinese ETFs which have been selected to be traded in margin trading mechanism earlier than other ETFs from the perspectives of volatility to consider the impaction of margin trading mechanism. It firstly summaries the methods of analyzing the impaction of margin trading mechanism on stock market from the prospective of volatility from relevant literatures in order to find the methods of analyzing the impaction of margin trading mechanism on ETFs from the prospective of volatility. Secondly, It analyzes the investment characteristics and trading patterns of margin trading mechanism, the investment characteristics and trading patterns of the ETFs, from the perspective of empirical research in order to find the methods of analyzing the impaction of margin trading mechanism on ETFs from the prospective of volatility. In this paper, GARCH models, are used to research the relationship of margin trading mechanism and volatility of ETFs. VAR models are used to research the relationship of short sales and volatility of ETFs. Finally, according the empirical results, It summaries four implementations of margin trading mechanism in order to promote the smooth operation of Chinese securities market.According to the results of GRACH models and VAR models, the paper finally comes to the following conclusions:(1) According to the results of GRACH models and the push of virtual variable, margin trading mechanism can suppress the volatility of HUAAN 180 ETF and HUAXIA 50 ETF in some degrees. (2) Short sales are Granger causality. In the early period of margin trading mechanism launching, the volatility of HUAAN 180 ETF and HUAXIA 50 ETF have been suppressed by short sale mechanism.