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Margin Trading and Volatility: Further Evidence from China’s Stock Market

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  • Shiqing Xie
  • Yuwei Jia

Abstract

Different methods were implemented for each margin trading policy stage to estimate policy impacts on volatility of China’s stock markets, which include but not limited to VAR model, impulse response function, and ARCH regression model. Unlike results from previous literature, this study shows that in the first two periods before policies were fully developed, margin trading was associated with an increase in the volatility. Only in the last period with the launch of a refinancing mechanism did the effect of reducing market volatility of margin trade start to take place, and this effect was statistically significant and large in magnitude.

Suggested Citation

  • Shiqing Xie & Yuwei Jia, 2019. "Margin Trading and Volatility: Further Evidence from China’s Stock Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(6), pages 1375-1387, May.
    • Handle: RePEc:mes:emfitr:v:55:y:2019:i:6:p:1375-1387
    DOI: 10.1080/1540496X.2018.1558052
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