Research About The Impact Of Information Transparency On The Stock Price Volatility Under The Condition Of Margin Trading System

Building a multi-level capital market provides an important support to China's economic transformation, and it is a necessary requirement for deepening our country's comprehensive reform. But high stock price volatility has been a tough problem for China's stock market. Excessive volatility of stock prices increases the uncertainty that investors have to deal with. What's worse, it may induced systemic financial risk when the stock market crash, which is going against to the healthy development of capital market. The introduction of short selling mechanism in margin trading system makes the end of "unilateral market". As the new factor for affecting stock price volatility, the margin trading system is beneficial to restrain the high stock price volatility which induced by price overvaluation. The paper attempts to explore the impacts of information transparency to the fluctuations of stock price, under the condition of two-way trade mechanism based on "natural experiment" of margin trading system.Two-way trade mechanism is the key point of information transmission. And there is a "moderating effect" that two-way trade mechanism acts on the relationship between information transparency and stock price volatility. On the one hand, the establishment of two-way trading mechanism complete the information transmission channel, which is advantageous to stability of stock price. On the other hand, two-way trade mechanism exert a certain degree pressure on the listed company in improving the transparency, resulting in a greater degree of reducing stock price volatility. The paper empirically tests of the influence of ranging stocks in margin trading targets, short selling and information transparency on stock price volatility based on the data of margin trading underlying securities listed on Shenzhen Stock Exchange. The results indicate as follows. Firstly, the introduction of two-way trade mechanism and the improvement of information transparency are beneficial to the stability of stock price volatility. Secondly, after having been covered in the range of margin trading, the stock experiences a significant further decreases in price volatility, which means "moderating effect" hypothesis proving to be true. Thirdly, the paper also find that the introduction of two-way trade mechanism and improvement of information transparency restrict the disturbance of noise trading and other irrational factors when regarding stock idiosyncratic volatility, resulting in lower stock idiosyncratic volatility. As the same as above, the "moderating effect" of margin trading system also exists to the stock idiosyncratic volatility. Fourthly, the proportion of short selling transactions is so small comparing to the whole margin trading that restricts the effect of short selling mechanism on the stability of the stock price. Combination of theoretical analysis and empirical results, this paper proposes three policy recommendations for decreasing stock price volatility from perspectives of improvement in margin trading system, promoting the expansion of margin trading steadily and strengthening supervision on information disclosure violations.