The Research On The Effect Of Margin And Short-selling On The Volatility Of Stock Price

Margin trading is considered by investors as one of the important reasons for the sharp fluctuations in the A-share market in recent years,which is contrary to the theoretical basis.And the academic community has always been controversial on this issue.Whether margin trading has increased the stock price volatility?Is there a difference in the market conditions of its influence mechanism?This article will examine the impact of margin trading on stock price volatility in different market conditions in order to find the differences,which will help investors deeply understand the internal mechanism of margin trading,and the regulators can also formulate more flexible policies to adapt to market.This will undoubtedly have important academic value and practical significance.This article first summarizes the relevant literature,on the basis of which the research perspectives of this paper are proposed.Then,the general impact mechanism of stock price fluctuations and the mechanism of the effect of margin trading on stock price fluctuations are analyzed.Then,this article selects all of the Shenzhen stocks listed before 2013,and uses the stock weekly data from January 2013 to May 2016 to divide the market into slow-rising,slow-falling,rapid-rising,rapid-falling and sharp fluctuation using Hidden Markov Models.Finally,conclusions are drawn and recommendations are made to investors and regulators.The main conclusions of this paper are as follows:1.In the overall market,the price volatility of the underlying stocks under margin trading is smaller than that of non-standard stocks,which indicates that margin trading can reduce the stock price volatility in the overall market.If market conditions are divided into extreme market conditions and non-extreme market conditions,margin trading can still reduce the stock price volatility.This is consistent with the previous research findings of most scholars.2.if the extreme market is divided into rapid-rising,rapid-falling and sharp fluctuation,the non-extreme market is divided into slow-rising and slow-falling,at this time the impact of margin trading on the stock price volatility have differences.Specifically,when the market crashes,margin trading will increase the volatility.This article believes that the reason for this phenomenon is that when investors use leveraged trading tools,they focus on their leverage,and most investors will use that to expand their private profits when the market rises,and when the market appears in sentiment,the previous financing transaction will be voluntarily or forced to close out,which will lead to a lot of selling pressure in the market,causing the stock price to drastically decline.In addition,in the rapid-rising market,the effect of margin financing on stock price volatility is most obvious.Therefore,in the extreme market,the effect of margin financing on stock prices can be summarized as "inhibiting rising and helping the market fall."3.At present,there is a serious imbalance in the scale of margin trading and securities lending.Margin trading has more significant market influence than securities lending.The scale of securities lending is too small and its functions may be overshadowed by margin trading.In addition,when the market plunged,the government's bailout behavior also eased the stock price fluctuations in the HS300,which served to stabilize the market.