Does Short Sale Constraint Reduce Market Risk?

Since the establishment of China's stock market in the 1990 s,stock prices have fluctuated frequently.The establishment of margin and short selling mechanism is an important event in China's stock market,which is extremely important for the stability and future development of the entire stock market.Some scholars and professionals believe that the establishment of margin financing and short selling mechanism can restrain the volatility of the stock market,while some believe that the leverage of margin financing and short selling mechanism may increase the possibility of pursuing rise and killing decline,resulting in greater volatility of the stock market.Then,whether the margin and short selling mechanism can really stabilize the volatility of China's stock market is a key issue in this study for whether China's stock market can suppress the volatility or increase its volatility.This paper studies the effect of margin and short selling policies on the volatility of China's stock market,in order to provide reference and Suggestions for the development and future of China's stock market to some extent.The main findings of this paper are as follows:First,before the formal pilot program of margin trading and short selling policy,investors in the stock market had a bullish expectation due to the impact of negative news.The stock market achieved relatively smooth and steady growth,and the stock market volatility was relatively low at this stage.Second,in the pilot phase of margin and short selling policies(the second phase),the stock market has played a role in calming the volatility of the stock market.But after the first and second expansion,country to allow margin trading company suddenly eased restrictions,lead to the margin trading on the market a little confusion,combined with the mechanism of margin trading development of our country is not very perfect,so not only do not have the effect of stability of the stock market,on the other hand also increased the volatility of the stock market.Third,after two expansions,and after three and four(phases five and six),the margin and short selling mechanism can still play a role in stabilizing stock market fluctuations.Fourth,in the seventh stage,the margin trading mechanism strengthened the volatility of the stock market.To this end,this paper proposes the following policy Suggestions: first,reduce the cost of margin trading and short selling,and guide the benign development of the mechanism;In addition,strengthen supervision and management,the choice of camera.