8 ABSTRACT In March, 2010, after years of deliberation and preparation, Margin Trading mechanism was formally launched in China, which has become a milestone in the history of A-share market. Over the past four years, Margin Trading had achieved rapid development. As of September, 2014, there are a total of 79 pilot securities companies, 900 underlying stocks, over to 4 million margin accounts in A-share market. Moreover, the margin balance had exceeded 600 billion. An important purpose for lauching Margin Trading in China is to make it play a positive role in market stabilization and price discovery, avoid sharp fluctuations of st ocks and promote the development of stock market healthly and steadily with the mec hanism of two-way trade of Margin Trading. However, had Margin Trading mechanism really played a role in reducing sharp stock volatility in A-share market in practice? If had, what about the degree of it? This paper firstly introduce some related concepts of margin trading and stock volatility, elaborate the mechanism of the influence of Margin Trading to the fluctuation of the stock and compared the changes of stock volatility before and after the pilot margin representative. We get a preliminary assumption that margin trading can reduce the fluctuation of stock prices. Then, this paper takes Shanghai Pudong Development Bank (600000, SH) as the research object, and establish VAR Model by a series of sample data. On the basis of VAR Model, we using the Granger causality test, impulse response analysis and variance decomposition method to carry out the empirical research. Research shows that in the short term, Margin Trading has a certain impact on stock volatility. More specifically, the financing transaction has a larger effect on stock volatility, while the short-selling transaction has a smaller effect on stock volatility. In the long run,
9 Margin Trading mechanism has no lasting impact on stock volatility, which is mainly from itself. The reason is the current scale of Margin Trading is small, and the financing transaction and the short-selling transactions developed uneven in A-share market. Based on the research conclusions, in order to make Margin Trading to play an active role in reducing sharp stock volatility and establish a healthy and stable market in China,this paper presents a series of policy recommendations as followed: positive guidance, perfecting rules, rational investment, and strengthen supervision. Key words: Margin Trading;Volatility;VAR Model.
12 CONTENTS CONTENTS Introduction Background and Significance Research Status and Literature Reviews Research Ideas and Methods Structure and Content Innovations and Deficiencies Chapter 1 Summary of Margin Trading and Stock Volatility Summary of Margin Concept of Margin Trading Features of Margin Trading Functions of Margin Trading Development Course and Present Situation of Margin Trading in China Summary of Stock Volatility Concept of Stock Volatility Influence Factors of Stock Volatility Measurement of Stock Volatility Chapter 2 Discussion on the Relationship between Margin and Stock Volatility Effect Mechanism of Margin on Stock Volatility Positive Mechanism Negative Mechanism Restricting Factors of Influence of Margin on Stock Volatility Ratio of Margin Trading Structure of Investors Customer Selection Criteria Market Supervision System... 27
13 CONTENTS 2.3 Comparison of Typical Stocks Shenzhen Stock Index(399001,SZ) PFYH(600000,SH) CAQC(000625,SZ) GMJS(300077,SZ) Brief Summary of Chapter Chapter 3 Empirical Analysis-Take PFYH As An Example Sample Selection and Data Sources About the Selection of the Sample Data Sources Introduction of Models ADF Unit Root Test VAR Mode Granger Causality Test Impulse Response Analysis Variance Decomposition Empirical Analysis Stationarity Test Establish VAR Model Granger Causality Test Impulse Response Analysis Variance Decomposition Brief Summary of Chapter Chapter 4 Conclusions and Suggestions Main Conclusions Policy Suggestions Reference Acknowledgements... 58
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