Study On The Impact Of Margin Trading On The Volatility Of Chinese Stock Market

China officially launched margin business on March 31,2010,which meant a farewell to the era of prohibiting credit trading.Margin business provides short mechanism through the support of margin so that investors are no longer constrained by the shortage of their own funds or securities,which greatly mobilizes investment enthusiasm,accelerates the circulation of funds and securities,and activates the market trading.The opening of the margin business is aimed at providing market liquidity and is expected to achieve the desired policy effect of stabilizing the market.With the expansion of the target securities and the implementation of the securities financing,the scale of margin trading and short selling is gradually expanding.In the process of the continuous development of the margin business,whether the margin business realized the function of stabilizing the market as expected in the policy design initially,and whether its influence on the stock market volatility is consistent,both needs to be further studied.In order to study the above problems,after teasing out the relevant literature of margin business at home and abroad,it is found that the academic community has not yet reached a unified conclusion.Combined with the theoretical analysis,this paper studies the impact of margin business on the stock market volatility from two perspectives.One is to examine the effect of the scale of margin trading and short selling on the volatility of the stock index from the market level and industry level,selecting the HS300 index and industry index,and using GARCH(1,1)model to fit the volatility of the index.Roughly dividing the stock market cycle,choosing two research intervals,respectively from 2014.6.3 to 2016.3.1 and from 2016.3.1 to 2019.1.31,which can also be named “the stage of drastic fluctuation” and“the stage of non-drastic fluctuation” in order to compare the effect of margin business on the stock market volatility in different stages.Seting up the three-dimensional VAR model of margin trading index,short selling index,and market volatility,then determine the role of the scale of margin trading and short selling on the volatility of the stock market and the degree of impact through Granger causality test,impulse response analysis and variance decomposition.The empirical results show that in the stage of drastic fluctuation,margin trading and short selling sometimes restrained the market volatility,sometimes aggravated the market volatility,while in the stage of non-drastic fluctuation,the margin trading suppressed the market volatility,the short selling increased market volatility,and the empirical result of most industries is similar to that of market level.The second is to examine the impact of the structure of margin investors on the volatility of the stock market.The HS300 index is also chosen to be as the the market representative,using the closing price of the market index to calculate monthly standard deviation to measure volatility.The study interval is from 2011.1 to 2019.1,which is consistent with the length of the credit account data.Establishing VAR model of the ratio of individual investor,the ratio of institutional investor,and market volatility,then determine the impact of different margin investors on the volatility of stock market through Granger causality test,impulse response analysis and variance decomposition,The empirical results show that the volatility of the stock market increases with the increasing of the ratio of individual investors increases,and the volatility of the stock market decreases with the increasing of the ratio of institutional investors.Finally,summarize the empirical results.In order to make the research conclusions more persuasive,the paper try to explain the results from the aspects of market,behavioral finance,investor structure and so on.Then put forward corresponding countermeasures and suggestions for regulators and securities companies hoping to better develop margin business,and promote the margin business to play a positive role in stabilizing the market.