Empirical Research Of Securities Margin Trading's Impact On Idiosyncratic Volatility And Its Premium

Traditional financial theory indicate that only Systematic risk shoud get risk compensation and has positive premium; idiosyncratic risk can be offset by diversification, therefore it does not need risk compensation. However, in the process of investment, investors often be restricted by a lot of realistic condition, such as transaction cost, information asymmetry, economic status, occupation, level of education and so on, can't hold completely dispersed investment portfolio. Therefore, investors need additional investment income for risk, hence idiosyncratic risk should have positive premium as well. But in recent years, some studies have found a phenomenon of "idiosyncratic volatility puzzle", namely Idiosyncratic volatility is negatively related with yield. The discovery of this phenomenon formed widely discussed, but has no unified conclusion up to now. As far as we know, many great changes have taken place in China's securities market in recent years, China's securities market stocks' idiosyncratic volatility has premium or "idiosyncratic volatility puzzle", especially China's securities market allowed Margin trading in March 2010, China's securities market from the single market becomes a bilateral market. The change of market conditions would or not impact on idiosyncratic volatility and its premium. Under this influence, investors need how to adjust their investment decisions, all of these underlying questions has high practical significance research problems in financial field.This article mainly empirical analysis and discuss from the following aspects:the margin idiosyncratic volatility's change in Chinese securities market, the change of the idiosyncratic volatility premium, financing transactions, securities trading and Margin trading's influence on idiosyncratic volatility and it's premium. The following conclusions are drawn:first, the double difference model and multiple regression model, this paper found that Margin trading enlarged the idiosyncratic volatility, and that Margin trading and securities trading has different influence on idiosyncratic volatility:Financing transactions increased the idiosyncratic volatility, however securities trading reduced the idiosyncratic volatility. Second, Margin targets does not exist "idiosyncratic volatility puzzle" phenomenon in China's securities market; financing transactions and Margin trading improved the idiosyncratic volatility premiums, financing transactions Influence degree Weaker than Margin trading, Securities trading no significant impact on the idiosyncratic volatility premium. Finally, by using Grouping regression multivariate regression model discovered: Margin trading and securities trading impact of idiosyncratic volatility premium has different trend, Idiosyncratic volatility premiums decreased with the expansion of securities trading, With the increasing of financing transactions scale shows the tendency of lowered after the first.