Research On The Influence Of Financial Leverage On Stock Market Price Fluctuation

The 2008 financial crisis has led to a certain degree of recession in the economies of the world.In order to stabilize economic development,some economies have adopted active monetary and fiscal policies to stimulate economic recovery.For example,the implementation of quantitative easing monetary policy,coupled with the implementation of tax reduction policies,the combined effect of these policies,while bringing short-term stimulus to the economy to promote the economy in a short-term.However,the government's fiscal expenditure has increased,which has increased the level of debt of the government and enterprises.At the same time,the level of financial leverage has also increased significantly.In particular,under the implementation of the QE policy,the level of financial leverage has continued to rise,which has had a major impact on asset price changes and macroeconomic operations.After the crisis,the Chinese government implemented a four trillion plan to save the market losses as soon as possible.From the perspective of the effect,under the stimulus of the four trillion fiscal policy,China's central bank has expanded its balance sheet and continuously supported social financing needs.Under these series of influences,the government and the corporate sector have increased the leverage of transmission mechanisms.As a result,China's debt level has risen overall and financial leverage has remained high.When the level of leverage is concentrated to a certain extent,it is easy to trigger the outbreak of systemic risks.However,preventing systemic risks is a key task that China has mainly focused on in recent years.Under the general policy of supply-side structural reform proposed in 2015,the five priority tasks of cutting overcapacity,reducing excess inventory,deleveraging,lowering costs,and strengthening are established.Among them,deleveraging is one of the key tasks.Therefore,the impact of financial leverage on China's economic development is debatable.This paper mainly studies the spillover effect of China's macro financial leverage on price fluctuations in China's stock market.Therefore,from the perspective of stock price fluctuations,this paper analyzes the impact of financial leverage on it.Firstly,from the perspective of financial accelerators with financial accelerators and financial innovation effects,this paper analyzes the mechanism of financial leverage,and the characteristics and functions of stock market with information asymmetry,portfolio and financial resources allocation,and theoretically analyzes the relationship between financial leverage and stock price fluctuations.Secondly,the paper analyzes the financial leverage and stock market price fluctuations around 2008,and finds that the financial leverage level shows an upward trend as a whole,while the stock market fluctuates in 2007 and 2015.Later,in order to further explore the impact of financial leverage on stock market price fluctuations,the paper selects 91 quarterly data from 1995 to 2018,and uses the TVP-VAR model to verify the impact of financial leverage on stock market volatility.The study finds that financial leverage has a significant positive stimulus effect on the stock market in the short term,but with time as time goes by,its influence on the stock market gradually narrows and converges.If the financial leverage is too high,it will aggravate the stock price volatility,and the violent fluctuation of the capital market will weaken the stability of the market.Finally,based on the theoretical and empirical results,it provides four countermeasures and suggestions for preventing systemic financial risks in China:improving financial leverage risk warning,promoting stock market reform,deepening financial supervision system construction and advocating rational investment,etc.