The Impacts Of Margin Trading On The Market And Price Of Underlying Stocks

Margin trading has some important functions such as enlarging the securities' supply and demand,increasing stock market's liquidity,stabling and discovering stock price and so on.It has been grown fast since it became effective in A-share market in 2010.The number of underlying stocks become more after four times expansion.Mrgin trading turnover in A-share market also gradually increases,its effects on stock market increasingly highlights.The impacts of margin trading on market and underlying stocks,especially on the volatility,has been a focus among academics and practitioners,but so far,there is no consistency conclusion.After six years of practice,effects of margin trading on market and underlying stocks are what this paper study for.Based on the basic theory of margin trading,we use a combination of qualitative and quantitative research methods.Firstly make qualitative analysis of effects on the whole market.Secondly,use the VAR model,Granger causality test,impulse response to make an empirical analysis on the influence of margin trading on stock index,the result shows that margin purchase is Granger cause to stock index changes,which push index higher;short selling has inhibitory effect on the fluctuation of stock index,but still a small role.And then,select relevant data of fourty underlying stocks during september 2013 to july 2016 total 684 trading days,among them,twenties are blue chip stocks,the others are poor performance stocks.through cointegration test and variable intercept regression model,we carry on the empirical analysis on the blue chips and low quality stocks' panel data.The study found that: the margin trading can push the price of underlying stocks riser and role stronger in low quality stocks,the short selling trading can make the stocks' price more stable,but the impacts are weak on low quality stocks.Finally,learning foreign margin trading operation in mature stock markets,make some suggestions to promote the development of margin trading in China.For examper,strict the introduction of underlying stocks and take a various management on them,construct well system of information discloser,cultivite investors to investment rationally and so on.So that can promote the healthy development of margin trading.