Research On Asymmetry And Market Effect Of Margin Trading

In the opinion of economists of Efficient Market Hypothesis,stock market prices should fluctuate around its value randomly.When prices deviate from their intrinsic value systematically,long and short sides of the market forces will reverse,then make the value to return.However,under the constraints of unilateral long market trading mechanism,in the view of short(long)side,even the market price is significantly higher(lower)in its intrinsic value,due to the lack of liquid assets,its short(long)power is also difficult to actually formed,which result in stock market prices further away from its intrinsic value,and running ups and downs.The creation of margin trading system not only revolutionize the profit model of unilateral long market trading mechanism,but also ensure the stock market to run stably under the assumption of symmetry of margin trading.But in practice,we have found that the symmetry conditions can not be met,and it shows a characteristic of asymmetry.When the margin trading shows asymmetrical features,what kind of impact it will produce on the running of the stock market?Based on the systematically combing of related research,this article demonstrate the asymmetrical feature of margin trading.We select the data from February 1,2013 to 2015 to February 26,2016 as the sample,devide it into the balanced market,bull market and bear market,then use descriptive statistics and non-parametric tests to analyze the feature of quantity and asymmetry of distribution from both long and short term.We found that in short-term and long-term,the asymmetry in quantity and distribution of margin trading all exist.Then,use GARCH model,VAR model,Granger causality test,IRF impulse response and variance decomposition to analyze the market effect of margin trading.The conclusions are as follows:(1)In the long term,the margin trading plays significant positive and negative effects to the changes in volatility,and the negative effect is greater.For liquidity,financing is the Granger cause of it,but securities lending is not.To the degree of influence on the market,financing are greater than the securities lending.(2)In the balanced market of short term,financing and securities lending are not the Granger causes of volatility,and appear the bidirectional impact after impacted,but the negative effect that reduce volatility is the main.Variance decomposition shows that financing and securities lending all play little part of the volatility.Financing and securities lending are the Granger causes to the liquidity and appear the positive impact after impacted.Variance decomposition shows the ratio that financing and securities lending explain for liquidity is approximately equal,so it's difficult to embody the asymmetry of margin trading.(3)In the Bull market of short term,financing and securities lending are not the Granger causes of liquidity and volatility,and the reverse are also not.Financing and securities lending appear the unidirectionally positive impact to volatility.Similarly,financing and securities lending also appear the unidirectionally positive impact to liquidity,and the role of financing is greater than the effect of securities lending.Variance decomposition shows the part that financing explain for volatility,liquidity are greater than the securities lending.(4)In the Bear market of short term,financing and securities lending are the Granger causes of volatility,and appear the bidirectional impact after impacted----not only decrease volatility,but also increase it;.Variance decomposition shows the impact of securities lending is larger than financing.For liquidity,margin trading is not the Granger cause of it,but to a certain extent,promote or enhance the liquidity.Variance decomposition shows the part that financing explain for liquidity is greater than the securities lending.