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The Impact of Securities Margin Trading on Chinese Stock Market

Author

Listed:
  • Shaozhen Chen
  • Liang Su
  • Li Lin
  • Chaoqun Zhou
  • Haohui Lin

Abstract

In this paper, we take Shanghai Stock Market as the research object, conducts a multi-dimensional analysis of the volatility of the Shanghai Stock Exchange 50 Index before and after the introduction of margin trading. After the implementation of the securities margin trading policy, the historical volatility of the securities market has obviously been weakened. From the perspective of dynamic volatility, we establish a GARCH (1, 1) model by introducing the dummy variables according to the AIC and SC optimal rules, and establish TGARCH (1, 1), EGARCH (1, 1) and PGARCH (1, 1) to analyze the asymmetry. All of the model results show that the introduction of margin trading reduces the risk of the stock market and weakens the asymmetry. In order to test the effect of the residual distribution of returns, we assume that the residuals follow the t distribution and the GED distribution respectively and establish the optimal GARCH (1, 1) model. The final result is the same as those under the Gaussian distribution assumption.

Suggested Citation

  • Shaozhen Chen & Liang Su & Li Lin & Chaoqun Zhou & Haohui Lin, 2018. "The Impact of Securities Margin Trading on Chinese Stock Market," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(4), pages 101-111, April.
    • Handle: RePEc:ibn:ijefaa:v:10:y:2018:i:4:p:101-111
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    More about this item

    Keywords

    dynamic volatility; asymmetry; GARCH models; residual distribution;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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