Margin Trading’s Influence On The Quality Of Stock Market

On March 31, 2010, the margin trading was introduced into the mainland of China. It meant that China’s margin trading market entered a substantive stage after 4 years of careful preparation. Since then, the A share market ended the history of unilateral long mechanism. As a new measure of basic market system’s construction, the introduction of margin trading has an epoch-making significance on the development of China’s stock market.Developed capital market has a long history of margin trading, forming a set of relatively complete system of margin trading. Three kinds of typical trading pattern are as follows: America’s decentralized credit trading pattern, Japan’s concentrated credit trading pattern and Taiwan’s two-tier credit trading pattern. On the basis of the analysis of the most representative margin trading pattern, this paper studies the current situation of margin trading in our country and points out the positive and negative effects of China’s margin trading.However, how much influence does margin trading have on the quality of the stock market? The foreign and domestic scholars have given different views. Many research achievements mainly present three opinions. The first one is that the development of margin trading has a negative impact on the stock market. The second one is that the development of margin trading has few impacts on the stock market. The third one is that the development of margin trading has a positive effect on the stock market. Compared with the developed areas, China’s margin trading is in the initial stage. Its influence on the quality of China’s stock market still needs to be studied deeply and carefully by scholars.Taking China’s margin trading as the main research object, this paper explores margin trading’s impacts on the quality of China’s stock market from two aspects of theory and practice. Then, it provides some suggestions for the continuous improvement of China’s margin trading system. In the theoretical part, it elaborates the mechanism of margin trading on the quality of stock market in detail. In the empirical part, it uses Granger causality test, impulse response analysis and variance decomposition to make empirical tests. After that, it draws some conclusions. On the whole, margin trading has a positive effect on the stable development of the stock market. Finally, it puts forward some referenced advice to improve the quick development of our country’s margin trading business and to promote the healthy operation of our country’s stock market.