The Effect Of Margin Trading On Stock Market Volatility

The margin trading system is one of the most important financial innovations of China’s financial market,it provides a kind of tool to avoid the stock market fell risky financial instruments for traders,but the volatility of market research has been a hot topic in related fields.On one hand,the margin trading system will promote the stock market to Chinese double market trading patterns,the negative information can be timely reflected in the market,to reduce the volatility of the market.On the other hand,the leverage effect of the two financial transactions in the system may lead to increased volatility of speculative trading and increasing the market.2015 to 2016,China’s securities market has plummeted,the margin trading mechanism has also experienced different policy dramatic period of a sharp increase leverage,deleveraging and leverage regression,some analysts believe that the "high leverage" is one of the fuse crash.In the present study,the effect of the research is focused on 2015 before the margin on the volatility of the stock market,the research on the different policy period of margin trading on the stock market volatility is less;used DID model,the underlying shares as the experiment group and the other shares as the control group.Because of the underlying shares are not the randomly selected,so the experimental group and the control group sample heterogeneity.It will have impact on the results of the analysis.Based on the background,the paper a panel data methodology proposed by Hsia.Construct the counterfactuals as the control group,to eliminate the heterogeneity of the underlying shares.And then use the DID model to analysis the effect of margin trading on the stock market volatility in different policy dramatic period,and the ture volatility and counterfactual volatility difference as the treatment effect.The results shows that in the period of sharp leverage and de-leveraging,margin trading significantly heightened the stock market volatility.The finance load exchange heightened the stock market volatility,the securities load exchange exacerbated the stock market volatility.When the level in the reasonable interval,margin trading stabilized the stock market volatility.In this period,both finance and securities load exchange are stabilized the volatility.Therefore,regulatory authorities should be strengthen the supervision and regulation of the margin trading mechanism,the implementation of the policy of the margin trading,it will play a positive effect.