The Impact And Mechanism Of Margin Financing And Securities Lending On The Underlying Stock Price Volatility

Margin trading is a business activity of security companies that they lend money to the customers who can deposit corresponding collateral,for buying securities or lending securities for selling.Informed player can use the private information with both positive and negative aspects do leverage by Margin trading.Margin trading can effectively promote the share price to reflect the company's intrinsic value as real as possible,so as to improve the efficiency of market pricing.But on the other hand,the leverage effect can also likely to attract more speculations to exacerbate market's volatility.Through selecting two batches of underlying stocks that brought out by China Securities Regulatory Commission respectively on January 31,2013 and on September 16,2013,this article uses a panel data policy effect evaluation method that proposed by Hsiao et al.(2012)to do research about impact and its mechanism on the stock market's particular volatility carried out by the launch of domestic margin system.By comparing the actual underlying stocks' particular volatility that generated after the margin trading beginning with their predicted particular volatility,I found that the launching of margin trading effectively reduce the quality of the underlying stocks' particular volatility.Through further study,I found that the noise trading has positive influence on underlying stocks' particular volatility while the speed of information into the share price of securities show a negative impact.For the company earnings quality,this article does not find there exist significant impact on underlying stocks' particular volatility.According to the results of researches,this paper then puts forward some relevant policies to provide references and suggestions to the regulators.