The Impact Of Margin Trading On Volatility Of China’s Security Market

With the basically completed of the shareholder structure reform and the mature development of China’s securities market, Our country securities market formally introduced margin trading mechanism in March 31, 2010.It ended the state of one-side market which has been implemented over the years. And it also was a milestone time in China’s securities history. In recent years, margin trading developed rapidly in our country. Particularly, the stock market has been into a bull market since 2014, then the scale of margin trading becomes bigger and bigger, even broke through RMB one trillion Yuan. At the same time, China Securities Regulatory Commission warned the risk of margin trading. It resulted in extended discussions about the effects of margin trading. And the topic of how margin trading affects the securities market’s volatility has been a hot issue in the theory and market research.In this paper I study how the margin purchase and short selling act on the volatility of the market respectively when I began my research, first I reviewed the theoretical research home and abroad. Then I introduced the short sale mechanism and reviewed the history of its development. In the section empirical test, I use VAR model, Granger causality test and impulse response function to do empirical test. Finally I reached the following conclusions:(1)Margin trading could not cause the volatility of China’s stock market, short selling trade could cause the positive fluctuations of our stock market, but the impact is very small.(2)Margin trading balance change is not the Granger causality of stock index. The margin trading is not the nature reason of market volatility.