Empirical Study Of Margin Impact On Volatility Of The Index And The Individual Stocks

Since the17th century the first short sale transaction happened in the Amsterdam Stock Exchange, short sales of securities trading has had more than400years of history. With the growing maturity of the securities credit market development is many scholars Patriots’s comprehensive and system research.And since March31,2010our country officially launched a pilot margin trading, but also just four years, there are many many domestic scholars’study, but most are based in Taiwan or Hong Kong stock market. Moreover, trading itself is not equivalent to short selling, therefore, the study of margin functioning in the domestic securities market systematically and comprehensively has more theoretical value and academic significance.Based on the review of numerous studies related to the basic functions of margin at home and abroad, the article try to study the price stability function of margin trading by empirical research method. Based on the literature study and theoretical analysis of the mechanism, we conduct our empirical analysis from stock market level, and individual level, systematically and comprehensively. In the study of stock marketvolatility, the paper mainly selects Eviews software, which has comparative advantage in time series processing involving Granger causality test, measurement analysis of the GARCH models, VAR model, impulse response, variance decomposition. In the margin impacts on their itself we use the Stata which has absolute advantage on panel data analysis software.And our analysis also is conducted from the overall effect and the personal effect on two levels.Through systematic research at different levels, the paper found that short selling is Granger cause market volatility, and they display a significant negative relationship; while margin and market volatility don’t have significant causal relationship by two sequences Granger causality test. But the causality test in VAR model lagging causal eight bands finds that they show significant causal relationship.It indicates that short selling has a significant impact on the market fluctuations, while financing effects have some uncertainty. On the impact of individual stocks, volatility measured by the day yield, short selling coefficient shows significantly positive; except a very few target stocks, financing has a significant negative effect to the the stock yields. Therefore, the margin can be considered to have a significant stabilizing effect on prices, and financing has played a stabilizing role in the stock price overall.