The Study On The Impact Of Margin Trading And Short Selling On Stock Market Volatility In China

China officially launched the margin trading and short selling transaction in March 31,2010.This initiative marks the end of China's pattern of one-side margin trading,so China's stock market development took a new step.It has been seven years since the introduction of margin trading and short selling transaction,In the past seven years,the amount of transactions and the number of shares in China's margin trading and short selling both have been a great development.The main purpose of the introduction of margin trading and short selling in the stock market is to prevent the stock market volatility to ensure the interests of investors and make the stock market steady and healthy,but because of the leverage of margin trading and short selling transaction and other factors in the stock market,can margin trading and short selling stabilizes market volatility in the end? This has become a very important research topic.In view of the above facts,this paper applies both theoretical analysis and empirical analysis to deeply study this issue.This paper first combs the basic concepts,the present situation and the mechanism of margin trading and short selling,which lays the foundation for the following empirical analysis.And then this paper exploits the GARCH model,VAR model,Granger causality test,impulse response and variance decomposition to do the empirical analysis of the effect of margin trading and short selling on the volatility of China 's Stock Market.The empirical analysis is divided into three parts,the first part is the overall study of the empirical test interval in March 31,2010-December 30,2016;the second part is to select the bull and bear market from the overall study interval to do the empirical analysis,which is acted as the robustness test.The third part is to do the empirical analysis in different industries in order to test the influence of margin trading and short selling in different industries on the stock market volatility.The results show that both margin trading and short selling have reduced the stock market volatility in the research range of this paper.The results of the robustness test also confirm this,whether in a significant bull market or bear market margin trading and short selling can also reduce the volatility of the stock market,while in abnormal fluctuations in the stock market,short selling can play a greater role in stabilizing the market volatility.The empirical results in different industries show that margin trading and short selling in manufacturing,finance,information transmission,software and information technologyservices can reduce the volatility of the stock market;Margin trading in the real estate can increase the volatility of the stock market in the short term,while short selling can reduce the volatility of the stock market;Margin trading in wholesale and retail has no effect on the stock market volatility,while short selling can increase the stock market volatility;In the mining industry,margin trading and short selling have no effect on stock market volatility.All in all,Margin trading and short selling launched by China's securities market can stabilize the market volatility,but margin trading and short selling in different industries have different influence on market volatility.In view of this,China's securities market regulators should combine the impact of margin trading and short selling to develop more reasonable policy measures to further ensure the healthy development of margin trading and short selling.