The Research About The Impact Of Margin Trading On The Volatility Of Chinese Stock Market

The margin trading business has been in a steady growth trend since the margin trading system was officially launched in March 31th,2010 in China.For five years,our margin balance has been growing from the initial 600 million to more than one billion today,and the financing amount accounted for the proportion of the market amount has been steadily promoting.Especially since July 2014,with a strong start of this bull market,the margin trading business has entered a stage of rapid development,and it has become the weapon of a lot of investors for increasing leverage.At the same time,the stock market turmoil intensified.However,there is still no unified conclusion about what the exactly impact of margin trading business on the volatility of the stock market.Therefore,this paper attempts to explore the impact of margin trading on the volatility of stock market in China with the agent-based computational financial method and empirical experiments.This paper simulates the heterogeneous investors in order driven market with the agent-based computational financial method,and the investment strategy for investors is determined by the combination of three methods,fundamental analysis,technical analysis and random investment.After the test,significant price discovery,fat tail and volatility clustering phenomenon are found in the simulation stock market,and it shows that the simulation stock market is in accord with the real stock market.This paper simulates four cases of order driven market of there exists margin,there only exists short selling,there only exists financing and there is no margin.According to the result,both the short selling behavior and financing behavior increase the volatility of the stock market,and the effect of the short selling behavior on the volatility is significantly greater than the financing behavior.In the empirical research,this paper examines the impact of margin trading on the volatility of the Chinese stock market by using the latest transaction data since 2014 July.This paper constructs the VAR model of the volatility variable and the margin variable and builds the impulse response function,and it comes to the same conclusion that the margin behavior exacerbates the market volatility while the short selling behavior affects the volatility of the stock market more than the financing behavior.In addition,through the comparison,it also draws the conclusion that as the two class of variable of margin behavior,the impact of daily margin trading volume on the volatility is greater than daily margin balance,which indicates the reaction of the volatility to daily margin trading volume is more sensitive.Therefore,this paper believes that regulators are supposed to control the daily margin trading volume rather than the margin balance data to reduce the volatility of the stock market.Finally,this paper explores the impact of the margin behavior of three major industries on the volatility of the stock market and finds that the impact of the financing behavior of three major industries on the volatility is similar,while the impact of the short selling behavior of financial industry is significantly greater than the manufacturing industry and information industry.This paper discusses the impact of margin trading on the volatility of stock market in China with the agent-based computational financial method and empirical experiments,and it comes to a common conclusion that the margin behavior exacerbates the volatility of the stock market,while the impact of short selling behavior on the volatility of the stock market is greater than the financing behavior.At the same time,the result of empirical research also shows that controlling daily trading volume is more effective than controlling daily margin balance data to reduce the volatility of the stock market.It also provides some suggestions for regulators.