The Impact Of Margin Trading On Volatility Of Stock Market Based On The Perspective Of Investor Sentiment

The development of margin trading is a necessary link to build a mature securities market.China formally implemented margin trading system on March 31,2010,which made selling short transaction possible in the stock market and led China into a new trading era promoting the perfection of the stock trading mechanism in the stock market.In recent years,scholars have done a lot of research on the volatility of stock market in margin trading business,but they have not reached a consensus conclusion.Some studies show that the development of margin trading helps to restrain stock market volatility.There are also studies show that the implementation of the margin trading will aggravate the volatility of the stock market.Also,some results show that the impact of the transaction on stock market volatility is not very obvious.Both in theory and in reality,the study of the impact of margin trading on stock market volatility is of great significance.This paper breaks through the traditional financial research ideas,and studies the impact of the transaction on stock market volatility from the perspective of investor sentiment.Firstly,we select relevant data of buying long,selling short and stock market volatility to process and construct a three-dimensional VAR model to analyze whether and how the two-way trading affects stock market volatility.Secondly,this paper incorporates margin trading into the construction of comprehensive index of investor sentiment,and analyses the effect of margin trading on investor sentiment.Finally,we study the influence of investor sentiment on stock market volatility through VAR model,and reveal the role of investor sentiment behind margin trading.The results show that buying long transaction will aggravate stock market volatility,and selling short transaction will play a certain inhibitory role to stock market volatility.And the contribution rate of buying long transaction to stock market volatility is 28%,and the contribution rate of selling short transaction to stock market volatility is 14%;From the perspective of behavioral finance,margin trading contributes significantly to the construction of investor sentiment indicators,buying long transaction has a positive impact on investor sentiment,selling short transaction has a negative impact on investor sentiment.Ultimately,as buying long transaction dominate the margin trading in China's securities market,investors' sentiment will be enhanced as a whole;Margin trading aggravates stock market volatility through investor sentiment,which relies oninvestors' prediction of the future stock market.According to the empirical results,combined with the current situation of the development of China's margin trading,this paper puts forward relevant policy recommendations from three aspects: optimizing the structure of investors,improving the scale of selling short transaction and improving the regulatory system.