An Empirical Study On The Margin Trading’s Impacts On The Volatility Of China A-Share Stock Market

The margin trading has entered the pilot run phase since the March 31,2010 in China. It’s a great time for the bidirectional profit mechanism now. How will the introduction of the institution affect the stability of our capital market become one of the hot points widely discussed in the academic field. At the time point that the margin trading has entered the operational phase for 5 years, the margin balance has reached 1734.02 billion by April 17,2015 while the number was just 0.066 at the first day and expand by 260000 times. The stock market is stepping out of the depression from the second half year of 2014. The two points give the subject new research space.Selecting the weighted stock as our sample, taking the ups and downs of the stock market into our consideration are the two potential innovations of the paper. This paper select the SSE50 as the sample, set suitable time dummy variables, test the impacts of the margin trading to the volatility of the A share stock market in different time period and different market quotation in both horizontal and vertical orientation via EGARCH and VAR model.The empirical results show that, the effects of the short selling seems to be not significant,so is the margin trading when the market is in the period of downturn. While the market boosts,the margin trading will increase the volatility of the market substantially and continuously. Based on the conclusions I put forward several corresponding suggestions.