Research On The Effect Of Securities Margin On Volatility Of China's Stock Market

On March 30,2010, the Shanghai Stock Exchange announced that the margin trading system would be launched a pilot project in the March 31,2010. The declaration of the Member margin trading would begin. The margin trading business began to officially start. In six years, The margin trading business was expanded for four times in six years, which expanded the scale of transactions, the subject of shares expanded from 700 to 900 until September 22,2014. The number of underlying shares would account for one-third of the total number of A-share listed companies. The market capitalization would account for 80% of the total market capitalization of A-share market which would further enhance the subject of stock popularity and representation and would have important significance to the development of China's capital market.This paper studies the relationship of the time series of t securities margin balance, time series of the financing balance and the securities lending balance time series and time series of stock market volatility by using the method of theoretical analysis and empirical analysis.At the theoretical level, this paper introduces the business of securities margin trading. Firstly, it defines the related concepts and related theories,which lay the theoretical foundation for the following quantitative analysis,including the concept, characteristics, function of of securities margin,difference between ordinary securities trading and securities margin trading, risk influence and the volatility of stock market. Then it analyzes the influence of the volatility of China's stock market, introduces the mode of margin trading, the factors that affect the volatility of China's stock market and the mechanism of stock market volatility, which provides the theoretical basis and support for the empirical analysis.In the empirical level, we explore the relationship between securities margin and the volatility of China's stock market. We conduct empirical on the influence of changes in balance of margin, changes in financing balances, changes in securities lending on the volatility of China's Stock Market based on the data of the balance of securities margin after Shanghai Stock Exchange expanded for the fourth time taking March 31, 2010 to November 25, 2016 as the research object, based on the data from April 2,2010 to November 20.Firstly, , the variable is selected and described, and then the research method is determined, and he vector autoregressive model VAR is introduced. Then, we conduct stationary test, determination of Optimal Lag Order of Vector Autoregressive VAR Mode, Granger causality test, the analysis of Impulse Response Function and ariance decomposition on the time series of stock market volatility, the time series of the balance of securities margin trading, the time series of financing balance and time series of securities margin. The time series data of stock market volatility index, The first-order difference of the securities margin trading balance, first - order difference of financing balance, first - order difference of securities margin are studied on regression analysis by VAR model.Through the empirical analysis, the conclusions of this paper are as follows:Firstly, the VAR model is built among stock market volatility index-SZ, securities margin index-RR, stock market volatility-SZ, securities margin index- RQ. The optimal hysteresis order of each model is determined respectively showing 2, 2, 0. From the model estimation, there is a correlation what is determined Granger causality test, impulse response analysis and variance decomposition in RR, RZ, RQ and RQ.Secondly, how securities margin influences stock market fluctuation and how the volatility of the stock market affects the margin trading are judged by Granger causality test. The test shows: (1) RR is not the Granger cause which cause SZ change, SZ is the Granger cause which cause RR change; (2) RZ is not the Granger cause which cause SZ change, SZ is the Granger cause which cause RZ change; (3) RQ is not the Granger cause which cause SZ change, SZ is not the Granger cause which cause RQ change. Based on the above tests, we can see that there is a causal relationship between securities margin trading and stock market volatility,and changes in stock market volatility can cause changes in securities margin trading.Thirdly, the shock response is analyzed among RR, RZ, RQ and SZ used Impulse Response Analysis to conduct Cholesky decomposition. The results show that: (1) the increase of securities margin balance will stably restrain the volatility of stock market, the positive fluctuations in the stock market will promote the increase of securities margin balances; (2) An increase in the financing balance will stably restrain the volatility of the stock market, positive volatility in the stock market will promote an increase in financing balances; (3) The increase in the balance of the securities will stabilize the volatility of the stock market, the effect is not significant, because the size of the securities market in China's securities market is small, so its impact on the stock market volatility is small,positive fluctuations in the stock market will lead to an increase in securities lending balances. There will form a negative impact after the first phase, to promote the reduction of securities lending balances.Finally, the variance decomposition was performed on the VAR model in RR, RZ, RQ and SZ. The conclusions are as follows: (1) The forecast variance of stock market volatility mainly comes from the volatility of the stock market itself, the effect of RR is not significant and the contribution rate is small; (2) The forecast variance of stock market volatility mainly comes from the volatility of the stock market itself, the effect of SZ is not significant and the contribution rate is small; (3) The forecast variance of stock market volatility mainly comes from the volatility of the stock market itself, the effect of RQ is not significant and the contribution rate is small.