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Explores the effects of margin trading on stock market returns and volatility in China, suggesting policy implications.
This study employed a GARCH model for parameter estimation and incorporated the incremental variables of financing balance, securities lending balance, and margin trading balance into the mean and variance equations to explore the impact of margin-trading activities on stock market returns and volatility in China. The empirical results showed that financing balance; securities lending balance, and margin trading balance were all positively related to the returns of the CSI 300 Index. In contrast, these margin-trading activities were found to have a significantly negative effect on CSI 300 volatility, implying that they contribute to the mitigation of stock market fluctuations. Overall, the results suggest that the liberalization of margin-trading policies contributes to stock market stability.
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Liang et al. (2026) studied this question.
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