Empirical Study On The Influence Of Margin Trading On The Volatility And Liquidity Of China's Stock Market

On March 31,2010,China formally implemented the Margin trading and short selling trading system,which changed the trading mode of one-tier long mechanism in the past,leading China into a new trading era.The margin trading system has experienced more than seven years of development in China,and the scope and scale of the transaction have been rapidly amplified,and the impact on the stock market has been increasing.But compared to other mature markets in the west,margin trading is not developed in our country,and the degree of marketization also lags behind.Whether it really play a role in enlivening and stabilizing the market get most attention.Therefore,this paper studies the specific influence of margin trading on China's stock market in volatility and liquidity.The study content of this paper is divided into two parts:theory and demonstration.In the part of theoretical analysis,the paper firstly summarizes the results of the research literature at home and abroad,at the same time,it introduces the definition,characteristics and functions of margin financing.Secondly,this paper summarizes the connotations,influencing factors and measures of the volatility and liquidity of stock market and then this paper further explains the mechanism of margin trading on stock market volatility and liquidity,which lay a theoretical foundation for the subsequent empirical study.Finally,this paper summarizes and analyzes the present situation and problems of margin trading of our country and then provides an analysis method for the suggestions of integrating business system.In empirical research part,based on two aspects of volatility and liquidity,this paper selects the daily trading data of Shanghai and Shenzhen stock markets from July 1st in 2013 to June 30th in 2017 as the research samples.Through the VAR model and other methods of metrological anlysis,the paper makes an empirical research on the influence of the margin on the stock market.In addition,considering the big price movements in Chinese stock market in around 2015,this paper's sample period is cut off into two periods:unilateral upward trend and unilateral downward trend,and then this paper makes an empirical study on the specific direction and results of the stock market resulting from margin trading under the different market environments.In this paper,empirical conclusions are as follows:(1)In terms of volatility,margin trading is the granger reason of the volatility of the stock market,which all also appear to reduce the stock market volatility in the short term,and the effect of financing transaction is more significant,but over time the effect will gradually be absorbed by the market.In liquidity,margin trading is also the granger reason of the liquidity of the stock market,margin trading have the same effect on the liquidity of the stock market.(2)when the market is in a rising environment,in terms of volatility,the short selling transaction still reduces the effect of stock market volatility which maybe not very significant,but the financing trade shows a negative effect that aggravates the volatility of the stock market.In liquidity,margin trading will still improve the liquidity of the stock market and play an active role in the stock market.(3)when the market is in a declining environment,in terms of volatility,the financing trading on the stock market volatility still has a stable role but the effect is not significant,at the same time in the short term the short selling transaction show the negative impact of the stock market volatility.In liquidity,the financing trading still shows the role of improving the liquidity of the stock market,but the short selling transaction has little effect on the stock market liquidity.Finally,the paper explains and analyzes the results of empirical research.And on the basis of previous theory,combined with the operating environment of China's economic market and the actual development of margin trading,the paper puts forward a series of suggestions from the aspects of the subject matter of margin trading,the system of transfer,the trading system of margin,the supervision mechanism,the internal construction of securities company and the education of investors,etc.,to improve the system of our country margin and promote the development of margin trading in China.It is hoped that some valuable suggestions can be provided for the perfection of China's margin and margin system.