Trader Leverage,Heterogeneous Beliefs And Market Crashes

Since the stamped-up plunge in China's stock market in 2015,scholars have begun to reflect on the role of China's margin financing and securities lending mechanism.In fact,the research on the mechanism of margin financing and securities lending by scholars began to rise after the launch of the two financial services in 2010,but few studies have linked it to the collapse of the stock market.Combining research at home and abroad,This paper argues that the framework of behavioral finance is more interesting from the heterogeneous belief to analyze the causes and consequences of China's stock market crash.At the same time,it is hoped to construct a model closer to the market to explain the collapse of China's stock market.The existing research only makes the opening of margin financing and securities lending as a short-selling mechanism is not in line with the actual situation.Judging from the objective situation of the market,China's stock market has strong short-selling restrictions and the balance of securities lending accounts for less than 1% of the financing balance.Therefore,due to the limited short selling,Chinese investors will not only use the conventional margin financing and securities lending channels(such as the 1:1 ratio of the two financing services provided by securities companies),but also adopt higher leverage levels.Ways of financing(such as stock income swaps,umbrella structured trusts,and off-market funds).So we used the margin financing data to build a positive trader leverage indicator and analyze its role in the market.This paper first discusses the effect of trader leverage on investor heterogeneous beliefs.The investor-leverage behavior in China's stock market has contributed to the investor's sentiment by the asymmetry of the mechanism.In the process of market upswing,it shows excessive optimism;in the process of market decline,due to the existence of short-selling restrictions,the hidden information of hidden pessimistic investors releases the price,which accelerates the decline of prices and exacerbates the negative bias of individual stocks and market returns.State,leading to stocks and market crashes.This paper argues that trader leverage has a magnifying effect on investor heterogeneous beliefs,and can further influence the distribution of stock returns through the amplification of heterogeneous beliefs,and portrays the mechanism of the impact of heterogeneous beliefs on the stock market crash.The research in this paper is more to analyze the mechanism of stock market crash from the amplification effect of trader leverage on investor heterogeneous beliefs.The latest research also analyzes the impact of leverage on liquidity to explore the stock market's collapse in the stock market due to the depletion of liquidity in the process of decline.Whether this is the two sides of things remains to be studied.However,through the model constructed in this paper and the portrayal of the existing market situation,the research ideas of this paper have indeed provided a reasonable explanation for the phenomenon of China's collapse.Therefore,this paper has its theoretical innovations,and also provides direction for subsequent research.