An Experimental Research Of Margin Trading’s Effect On The Securities Market

Since establishment in 2010, margin trading in China has been developing fast, becoming one of the most important parts of the securities market. Chinese securities market is famous for its high turnover rate, low liquidity, and high speculativeness. Whether it is reasonable to take advantage of margin trading and margin system to enhance liquidity, and refrain volatility and foam has been an important argument in literature, which also will promote implement of margin trading institution in China.Scholars have different opinions towards its effect on the market. Some scholars hold the opinion that margin trading improves the market while others think it will deteriorate the market environment. Also, some scholars believe that margin trading has no effect on the market. While in the issue of effect of margin requirements, there are also three kinds of opinionsTraditionally, empirical approach has the major approach of economical study. But recently, newly developed experimental approach shows its unique advantage in controllability and repeatability and becomes an important economic study approach. This paper hopes to research this issue with experimental approach and provide strong supports for the existing empirical approach. At the same time, most of experimental studies in this issue focus on margin trading, rather than trading requirements. And experimental research in China just begins to develop and lack relevant studies. So this paper hopes to fill in this blank area.This paper proposes four conjectures, and recruits subjects to participate in the experiment, including five settings. Then this paper uses descriptive statistics, independent samples t test, and multivariate regression analysis to analyze the experimental data. According to the data analysis, there are several conclusions:firstly, margin trading could efficiently improve liquidity, lower average price and suppress price foam; secondly, trading requirements are efficient tools for regulation of securities market; finally, maintenance margin decreases liquidity and increases price.Based on our conclusions and the current situation of Chinese margin trading, the paper puts forward policy advices in three aspects:firstly, improving margin trading institution and harmonious development; secondly, taking advantage of margin requirements and regulating margin trading reasonably; finally, setting up risk control system.