Empirical Research On The Impact Of Margin Trading On Security Market Liquidity

With the development of margin trading,the influence of margin trading to securities market in China is becoming more and more strong.So researching the influence of margin trading to securities market liquidity in China has important practical significance.But the study of this subject didn't get consistent results at home and abroad.The researching in this paper is based on the research result of Markus K.Brunnermeler and Lasse Heje Pedersen that about the influence between market liquidity and funding liquidity.This paper study at two aspects,the market as a whole and individual stocks.Choosing Shanghai and Shenzhen market trading data form April 2014 to March 2014,such as margin purchase turning volume,shout-sell turning volume,the Shanghai and Shenzhen 300 index data,using the least squares regression analysis and Granger causality test to study the influence of margin trading to market liquidity.Studies show that both margin trading and short-selling have positive correlation with market liquidity.The influence of margin purchase to market is stronger than short-selling.And margin trading,short-selling and market liquidity exists unidirectional causality,margin trading and short-selling is the granger cause of liquidity.For individual stocks,the researching are using difference-in-difference model.The underlying securities of csi 500 index as treatment group,the other securities of csi 500 index as the control group,research becoming the underlying securities whether have influence for stock liquidity.Studies have shown that margin trading can promote stock liquidity.Based on the above research conclusion,put forward three suggestions to the development of margin trading.First,adjusted margin trading by counter-cyclical policy.Second,control leverage,and steady development of margin trading.Third,strengthen the investor education and customer screening.