Research On The Effect Of Margin Trading On Pricing Efficiency In Chinese Stock Market

Margin trading is a kind of credit transaction.It is divided into two forms: borrowing money to buy stocks and borrowing securities to sell,which is the usual sense of "long sale" and " short sale".Well-established margin trading system can promote price discovery,and is conductive to the establishment of a country's capital market.In the 19 th century,the United States took the lead in launching the short-selling mechanism and achieved rapid development.However,due to the late start of the Chinese stock market and the credit system has not yet been established in the initial stage,it is in a market state that can only be long and can not be short.As China's capital market continues to improve,investors' needs have diversified,and the legal system has become more complete,margin trading became to pilot on March 31,2010.From the pilot launch until the end of 2016,the number of margin target pool extend from the initial 90 to 950,and the transaction volume also topped trillions of yuan.At the same time,we must also face the current lack of kinetic energy and the trend of the downturn in China's stock market.The root cause of this phenomenon is the lack and distortions of pricing functions.Therefore,it is helpful to establish an efficient and sound capital market by studying the effect of margin trading on the efficiency of stock pricing.Based on the "Overvaluation Hypothesis" proposed by Miller in 1977 and the rational expectation model established by Diamond and Verrecchina in 1987,this article researches the domestic and foreign scholars' literature based on the stock price response of the extent and speed to the information,explores the mechanism of margin trading affecting on stock pricing efficiency,and empirically analyzes the impact of margin trading on the stock pricing efficiency in China.First of all,from the aspect of stock price response of the extent and the speed to the information,we construct informativeness index and price lag reaction index respectively as proxy variables of stock pricing efficiency,and then introduce exchange,market value,turnover rate and price-earnings ratio as control variables.Secondly,taking the 1225 stocks of China's A-share main board market as samples,and taking the period from April 1,2010 to August 31,2017 as a research interval,to make horizontal comparison of pricing efficiency between margin and non-margin stocks.Thirdly,compare the pricing efficiency of margin and non-margin stocks in the two special period between bear market and bull market.Finally,taking the fifth expansion time as December 12,2016 as the site of the incident,we set up 65 new target shares as experimental groups and 120 shares that not in the margin trading target pool in the CSI 800 Index as control groups,building a difference-in-difference model to eliminate possible endogenous factors in the above conclusions.The empirical study of this paper finds that:(1)The horizontal comparison between the margin trading stocks and the non-margin stocks shows that the regression coefficients of the agent variables of the margin trading and the pricing efficiency index are negative,and both are very significant,indicating that the pricing efficiency is significantly higher than that of non-margin stocks;(2)In a bear market,the effect of margin trading on the pricing efficiency is greater than that of a bull market.;(3)The results of difference-in-difference regression show that the stock entering into margin trading pool has raised its pricing efficiency,and higher than non-margin stocks in the same time.