Study On The Relationship Between Margin Trading And Stock Returns—based On The Assumption Of Investor Heterogeneity

Margin trading opens the prelude of the two-way trading in the world.As an important part of the market mechanism,it marks the end of China's unilateral long history and investors can trade for short sale.Under the background,this paper studies relationship between margin trading and stock price returns.Although the existing research is quite rich,no matter in theory or in practice,there is no consensus on the research of this problem.Miller in 1977 obtain a result that the price of the stock is overvalued when short sale is limited.In other words,when short selling is restricted the stock price can not reflect the negative information.In the optimistic information bullish investors,the price will be higher than the theoretical one.Different from the predecessors' research,this article relaxes the homogeneity assumption in the traditional financial theory and thinks that investors have heterogeneity.Therefore this article agrees with Miller's heterogeneous hypothesis.It thinks that investors are expected to be different from the same securities asset in the future and the price does not fully reflect all the information.On this basis,the article uses the panel data of policy evaluation methods of Cheng Hsiao(2012)to deal with the problem on the basis of existing research and in the perspective of investor heterogeneity.The article tries to get a new understanding using the method different from predecessors under the new market.Specifically,based on the theory of stock price overestimate with short selling constraints,referring to the method of panel data put forward by Cheng Hsiao,this paper constructs the counterfactuals about yield rates not affected by the short sale after launch of the margin trading.By comparing with the real yields in the market During the same period of time,the article finds out the conclusion that the difference between the real yield and the counterfactuals have a significant negative effect after the launch of margin trading.Namely the introduction of margin trading will reduce the yield level of stocks.That is to fix the original short selling restrictions under the overvalued stock price.It is consistent with the theory of stock price under the restriction of short selling of Miller.Further,it is concluded that the financing transaction has a significant negative effect on the rate of return,the margin trading has a positive effect on the yield and the regression results are not significant.Comprehensivly,the margin trading is still significantly negative on the yield,considering the greater size of the financing transaction compared with the margin trading.Finally,taking into account the Miller's theory based on the perspective of investor heterogeneity,which is not in conformity with the traditional theory of financial,the paper returns the degree of heterogeneity of the investors between the return.It is concluded that after the introduction of margin trading,investors have a significant positive effect on the degree of heterogeneity and the stock price return rate.Taking into account the difference return is negative and in the process of decline,the article thinks that although the heterogeneity of investors under the restriction of short selling is the condition that causes the overrated stock price,the degree of heterogeneity between investors and overrated stock price is not positive correlation.