Research On The Impact Of Short Selling Mechanism On The Pricing Efficiency In China Stock Market

The asset pricing efficiency has been the core content of finance academic circle for a long time.The research on the impact of short selling mechanism on the pricing efficiency in securities market is the research on specific market microenvironment and price formation process.The pricing efficiency can be examined from two aspects: the extent and speed of stock prices responding to information.The extent of stock prices responding to information,shows whether the stock prices reflect all market information truly and adequately,especially the idiosyncratic volatility on company level.While the speed of stock prices responding to information shows whether the stock prices can absorb new market information timely and accurately.Therefore,taking the fifth and sixth expansion of margin trading underlying securities and nonunderlying securities as samples,the article studies the impact of introducing margin trading on the pricing efficiency in China securities market from two aspects of the extent and speed of stock prices responding to information.Referring to the approach of Bris(2007),the goodness-of-fit of regression of stock return and market return,and the correlation coefficient between current stock return and one-period lagged market return is used for studying the effect of short selling mechanism on the efficiency of stock prices reflecting negative information.Referring the approach of Hou & Moskowitz(2005),while market return representing new information,the stock price adjustment lagging indicator is introduced to build two new measurement indexes of pricing efficiency,which can measure the speed of stock prices responding to information.To solve endogeneity problem,the article analyses the pricing efficiency of stocks before and after which becoming margin trading underlying securities through event study method,and makes robustness test through Differencein-Differences Model commonly used in finance academic circle.The effect of short selling volume on stock price is also studied.The results demonstrate that the speed of stock prices responding to information among the fifth expansion of margin trading underlying securities,and the extent of stock prices responding to negative information among the sixth expansion of margin trading underlying securities,has been improved remarkably.The correlation between selling volume and pricing efficiency is positive,when there is more trade,there is more efficient.As a practical matter,the article provides empirical evidence for the relationship between margin trading and pricing efficiency in China stock market on the one hand,and provides the theoretical basis and empirical support for the improvement of relevant regulatory policies and further promotion and deepening of financial innovation on the other.