Research On The Impact Of China's Margin Financing And Securities Lending On Stock Market Volatility

Recent years we have witnessed an increasing development of the securities margin trading business and great improvement of corresponding system since it was officially introduced into China stock market seven years ago.The securities margin trading business' s effect on stock market has been always arousing increasing attention of scholars and China Securities Regulatory Commisson(CSRS).Through the whole period,China stock market experienced a long depression and a crazy boom since the second half year in 2014,the slump came in June 2015,then a slow rise from the early 2016 to 2017.Based on daily trading data from 2011 to December 29,2016,the paper firstly estimates the volatility of stock market by using GARCH model,and then analyses the system's effect through VAR model.The paper's innovation is that not only it investigates the average treatment effect using full sample but also it divides the whole period into bull market period and bear market period and estimates its impact respectively.This category is much more practical to the investors and policy-makers.The conclusion shows that financing and securities lending development is extremely unbalanced,and financing has an impact on the stock market volatility,but the securities lending has not been obvious.However,in bull market,securities margin trading will aggravate the stock market volatility.In the bear market,it will weaken the volatility.According to our conclusion,the paper suggests that regulators should strengthen investors education,optimize the level of investor structure and reduce the speculative.More relevantly,CSRC should improve the securities margin trading system and reduce the transaction costs.