The Asymmetry Of Short-selling And Margin-trading And It's Impact On Chinese Stock Market

On March 31,2010,China launched a plot scheme to lift the ban on margin-trading and short-selling.By the end of 2016,950 stocks are added to the list after five times of expansion.While stocks on the list have been expanding,the volume of margin-trading and short-selling has gradually expanded,but its asymmetry problem is also quite severe.In other words,margin-trading dominates in the market,and short-selling has been in the doldrums.As an important institutional innovation in the Chinese market,the program introduced short-selling mechanism to Chinese market,at the same time,more importantly,it provided financing leverage mechanism for the speculative traders.As we all know,the margin-trading has a great relationship with the 2015 stock market crash.Former researchers focused on the research of institutional change and short selling,while this paper studies the behavior of credit account investors' margin trading and the asymmetry characteristics from the perspective of microcosmic behavior,and analyzes how this kind of transaction behavior affects the market.Based on the sample data from December 2011 to August 2015,this study finds that margin traders use "chase and sell"investment strategies.After the stock prices rise,margin traders buy more stocks while short traders short less stocks,increasing the imbalance of margin trading and short selling.After controlling for other factors,short selling has a stronger ability to predict future excess returns,and the margin trading's prediction is weaker,indicating that the information content of the short selling is higher.Margin transactions have limited impact on market pricing efficiency,but increase the risk of market collapse,while short-selling activities have a positive import on pricing efficiency and decrease the risk of market collapse.So the asymmetry of short-selling and margin-trading will damage pricing efficiency and increase the crash risk.Finally,based on the existing research results,this paper puts forward some suggestions on how to develop short selling activities.At the same time,we need to pay more attention to the influence of the leverage effect of margin trading.The main contribution of this paper is to use the actual transaction data of margin trading,and analysis the asymmetric characteristics of the transaction of margin trading.In the study of the impact on the market,we pay more attention on the margin trading and short selling,especially their asymmetry.