Analysis On The Influence Of Margin Trading On The Idiosyncratic Volatility Of Chinese Stocks

After the introduction of margin trading on March 31,2010,China changed the"unilateral market" of stocks,and the strict short selling mechanism of Chinese stock market was broken.Margin and short selling business has experienced six major expansion since its inception,with the number of the two securities companies increasing from 90 to 1,600,and the size of the two securities business increasing from 6.59 million to 800 billion RMB.Two melt under the condition of the business,both in short sellers and investors who can according to their anticipation of market makes the corresponding trading options:on the one hand,when the stock market is overvalued,bearish investors can take short selling trading to borrow shares to sell at high prices and buy at low prices,so that the share price reflects more bad news of the company,which is conducive to restraining the rise of the share price.on the other hand,when the stock market is undervalued,bullish investors can turn to financing trades,borrowing money to buy low and sell high when their own funds are insufficient,to make a profit.Let the stock price reflect more good news,driving up the stock price.Margin trading allows traders with corporate information to have the space for arbitrage,and investors' behavior can reflect the risk of corporate characteristics.Margin and short selling business provides investors with the opportunity to buy short and sell short,and plays a role in reflecting the information of the company's characteristics,which promotes the dissemination of stock information.However,there is no unified conclusion about the impact of liang rong business on the stock fluctuations.Some scholars believe that margin trading spreads information at the company level,which is conducive to the stabilization of stock price fluctuations.However,after China's a-share crash in 2015,margin trading was criticized by many scholars,who believed that the transaction had the effect of 'chasing the rise and killing the fall',and instead magnified the stock volatility.Therefore,there is no consistent conclusion as to whether the two finance businesses increase the stock volatility or reduce the stock volatility.The research on margin and short selling business is also constantly enriched,considering that the development of margin and short selling business is extremely unbalanced in China.Chinese scholars are also improving their research methods according to the actual situation of our country.In this paper,the fifth large-scale expansion on December 12,2016 was used as the research time node,monthly data were adopted,and the research interval was from January 2015 to December 2018.We use the FF pricing model to estimate the stock idiosyncratic volatility and we use DID method to analyze the influence of the volatility of stock characteristics before and after expansion.The stocks newly listed in the two margin securities in January 2017 were taken as the experimental group,and the propensity score matching method(PSM)was used to obtain the control group.The control group was the stocks not included in margin securities during the study period.The indexes of the control group and the experimental group are consistent except whether they are two melting objects.The period from January 2015 to December 2016 is the pre-event period,and the period from January 2017 to December 2018 is the post-event period.We use the DID model to estimate the change of the idiosyncratic volatility of stocks in the experimental group and the control group before and after expansion to analyze the influence of expansion events.Due to the large gap between margin trading and short selling trading in China,this paper will use multiple regression analysis method to carry out regression analysis on the total margin trading,margin trading and short selling trading to discuss the impact on the idiosyncratic volatility.Finally,the Fama-French Three-factor Model was used to reconstruct the idiosyncratic volatility and conduct the robustness test.The empirical results of the paper are as follows:first,the Difference in Difference Model is used to obtain that the idiosyncratic volatility of the stock will be amplified after the event,that is,the idiosyncratic volatility of the stock will be increased after the stock is included in the fifth expansion.Second,multiple regression analysis shows that margin trading on the whole improves the idiosyncratic volatility.The effect of margin trading is opposite to that of margin trading:margin trading increases the idiosyncratic volatility,while margin trading reduces the idiosyncratic volatility.Finally,from the perspective of application,the paper puts forward some supporting advice from the perspectives of the government,listed companies and investors.The company shall enhance the value and regularly disclose information to ensure the disclosure of information;Investors should make value investment,be rational investors,pay attention to the direction of market trading,and do not do "chase up and down" noise traders.