Research On The Impact Of Margin Lending On Stock Price Volatility

With both leverage and credit attributes,financing and financing transactions have become an indispensable trading method in national securities markets.Since 2010,when China began to pilot the financing and financing policy,the number of underlying stocks in the securities market has been increasing,and the balance of the two financing facilities has also risen.However,academics are still confused about the impact of the implementation of the financing and financing policy.Longitudinally,whether the financing and financing policy will affect stock price volatility,what are the similarities and differences between the long-term and short-term impacts of the two financing policies,and whether the impact of the two financing policies on stock price volatility is consistent across different quotes;horizontally,whether the volatility of stock prices of different sizes and in different industries is affected by the same policies,these issues are still inconclusive.Therefore,this paper focuses on the underlying stocks of financing and financing instruments,and examines them from both a longitudinal and cross-sectional perspective,comparing the underlying stocks of financing and financing instruments with those of nonfinancing and financing instruments,and comparing the different components of financing and financing instruments from a cross-sectional perspective.Firstly,from a longitudinal perspective,this paper analyses the seven expansion events in history and uses a mixed-effects model to demonstrate that the financing and financing policy has dampened stock price volatility in the long run,but exacerbated it in the short run.In order to further investigate the reasons for the long-and short-term differences in the impact of the two-financing policies on stock price volatility,this paper uses a multi-period double difference model to demonstrate that the twofinancing policies suppress stock price volatility when the stock market is in a stable period,and exacerbate stock price volatility when the stock market is in a non-stable period.The paper then compares the differences between large-cap and small-cap stocks at the scale level,and between high-tech and non-technology sectors at the industry level,in terms of the impact of the twofinancing policy from a cross-sectional perspective.In terms of size,the policy has a stronger dampening effect on the volatility of small-cap stocks than large-cap stocks;in terms of industry,the policy has a stronger dampening effect on the volatility of stocks in non-high-tech industries than in high-tech industries.This paper summarises the above empirical results and draws a more general conclusion,i.e.the degree of market rationality determines the effect of the two-financing policy,and the market is generally rational in the long run,so the financing and financing policy can suppress stock price volatility.When the overall market is irrational,the financing and financing policy may increase the volatility of stock prices.Finally,based on the above empirical findings,this paper offers suggestions to the relevant regulators and investors.