The Effect Of Margin On Stock Returns

Since its inception,the margin has experienced more than six years,the underlying stocks of margin trading has experienced four times of expansion,from the original 90 Blue-chip shares,now nearly 900,who almost accounted for 1/3 the total market value,the circulation of market capitalizationof the total nearly 80%,margin scale the rapid growth,in December 2014 exceeded one trillion,and quickly exceeded 2 trillion in May 2015,then quickly fell to maintained at about 800 billion.The relationship between the scale of the margin trading and the market has been the focus of theory and practice debate,especially the influences of market prices rise and fall,in order to find the answer to the question,this paper research and analysis the relationship between margin and stock returns,margin and market volatility.Firstly,this paper generalize the overall concept of the margin basic function,the margin financing business model,financing management mechanism.Secondly,analysis of the margin trading mechanism of price discovery mechanism.Then,after four times expansion,the margin target stock was made of three stage panel data.Regression analysis of data from T-1 to T-3 days in each stage.The impact of changes in the rate of change in the balance of financing,margin balance rate of the underlying stock yield.By using the conclusion,we use 15 of the industry's 75 benchmark stocks for trading verification,and developed a trading strategy.