Research On The Impact Of Margin Trading On The Stock Price Volatility

On March 31,2010,China officially launched the pilot of margin financing and securities lending,allowing qualified investors to borrow funds from a securities company and purchase securities,or borrow securities and sell.As a mechanism innovation in China's stock market,margin financing and securities lending has completely ended the situation of China's stock market for many years in unilateral stock market,marking the official introduction of short selling mechanism in China.The development of China's margin financing and securities lending business adopts the model of piloting and post-promotion,and the underlying stocks are expanded step by step.From March 2010 to December 2016,a total of five large-scale expansions were carried out.After five times of orderly expansion and multiple small-scale transfers,as of October 15,2018,the number of margin financing and securities lending stocks increased from the initial 90 to 994.The scale of financing and securities lending also expanded from 12.772 billion yuan to 758.151 billion yuan.Since the opening of the margin financing and securities lending business,it has developed rapidly in China and played an increasingly important role in the stock market.Therefore,it is crucial to understand the impact of the margin trading system on the stock market.Scholars at home and abroad have not been able to reach a consensus on the impact of the two stocks on stock market volatility.Especially after the stock market crash in 2015,some investors and scholars believe that the stock market crash was caused by excessive leverage.Therefore,in this stock market crash,people pay special attention to the role played by the margin financing and securities lending business system introduced from abroad in 2010.How the launch of the margin financing and securities lending business system will ultimately affect the volatility of the stock market depends on many factors,and it is difficult to draw conclusions based solely on theoretical analysis.Therefore,this paper uses a combination of theoretical and empirical research methods to test the impact of the launch of the margin financing and securities lending business system on the stock market.The empirical analysis part uses the transaction data of the A-share market.This paper first expounds the concept and development status of the margin financing and securities lending business,and then analyzes the role of margin financing and securities lending business on stock prices from the perspective of supply and demand theory and behavioral finance theory.Next,this paper uses the condition of quasi-natural experiment of distributed expansion,selects the target samples in the bull market and the shock market respectively,and uses the propensity score matching method and the double difference method to get the longitudinal and horizontal comparison between the underlying stock and the non-standard stock to test the impact of margin financing and securities lending on stock price fluctuations in the bull market and the shock market.Through empirical analysis,this paper has the following two conclusions:(1)During the bull market,there is a significant negative correlation between the launch of the margin financing and securities lending business system and the price fluctuation of the underlying stocks.The volatility of the underlying stocks has dropped significantly after the margin financing and securities lending business.(2)During the shock market,the impact of the launch of the margin financing and securities lending business system on the price fluctuation of the underlying stocks was not significant.Finally,based on the empirical results,this paper combines the development status of the margin financing and securities lending business,and proposes to develop and expand the business,balance the margin financing business and securities lending business,and improve the margin financing and securities lending business systems.