The Effect Of Margin Policy On Stock Market Pricing Efficiency

The implementation of the Margin Policy is an important milestone in the diversification of China’s securities market,the performance of the margin financing and securities lending business in the securities market has been receiving much attention,especially in releasing market liquidity,hedging risks,and raising stock price discovery.Regarding pricing efficiency,the financing and securities lending business has been given high expectations by scholars and securities market participants.This paper analyses the relationship between stock pricing efficiency and shortselling transactions in the Chinese securities market.To draw a convincing conclusion,we set up efficiency indices and build difference-in-differences(DID)models to estimate the impact of the short-selling permission policy on stock pricing efficiency,Namely the information content of the stock and the reaction speed to the information.Data are collected one year before and after the initial enact of the short-selling pilot policy in 2010 and the fourth expansion of the short-selling permission list in 2014.Based on the results of two groups of DID models,we find that short selling puts a positive impact on stock pricing efficiency.Moreover,this positive impact gets stronger with the development of the financial market.Therefore,it is reasonable to conclude that short selling can increase the efficiency of stock pricing in the Chinese market.