Impact Of Margin Trading On The Abnormal Fluctuation Of Adjusted Stock Price

The year of 2015 is fluctuant for Chinese stock marker,the investor in this market have experienced the happiness from bull market in the first half of the year,meanwhile,all of them suffered the huge desperation in the last half of the amazing year.In order to explore the reason why the unforgettable fluctuation occur,a lot of scholars and specialists work hard and they find maybe the securities margin trading and illegitimate finance over the counter are the causes.The launch of securities margin trading regulation is a useful measure,which is aimed to enhance market liquidity and stimulate the vitality of the market,we admit that the effect because of the gradually increasing number of transaction.However,no one could make sure about whether the margin trading exacerbate or reduce the abnormal fluctuation of the stock market.The margin trading of Chinese stock market is more than six years that has already experienced hazard influence period.However,compared to the capital market in developed countries and regions,Chinese stock market has different characteristics from other markets where trading system and structure of market investor are making the same financial instruments and innovation in Chinese mainland market is different from other markets.Therefore,this paper will explore the securities margin trading's effect to the stock price which is based on Shenzhen security market.At first,this paper describe margin trading's function and characteristic,and then I define what the abnormal fluctuation is.In one part,the way to recognize abnormal fluctuation can be divided into two categories about different reference,the one is referred to the time serial,and the other one is referred to distinct between stock yield and market index yield.In the other part,I try to describe the stock price abnormal fluctuation from dimensions of frequency and width,which help me explore the relationship between securities margin trading and stock price abnormal fluctuation more accurately.The empirical part in this paper mainly used a panel model,I set a stock whether take securities margin trading or not as dummy variable where a stock taken into the rang of margin trading includes for the first time listed as the pilot margin trading stocks and later transferred by the Shenzhen stock market exchange for the rang of margin trading,and take both inner factors and external factors which may affect dependent variables into consideration,setting them as the control variables in the model.In order to get a reliable result,I used F test and Hausman test to decide which model is most suitable.Finally,I concluded that the margin trading would exacerbate the abnormal fluctuation of the stock price when a stock was taken into the rang of margin trading,and the effects are reflected in both frequency and width.But when a stock is taken out of the rang,the relationship between them are indistinct.Because the sample of the underlying stock is extremely deficient and when a stock is taken out of the rang,its stock price volatility is mainly affected by the major changes in the company's fundamentals.According to this study,we have learned that margin trading is still in the primary stage of exploration in Shenzhen stock market which is reacted violently by margin trading that abnormal fluctuation frequency and amplitude of margin stock will increase.Based on the results,the following suggestions are put forward.First,the China Securities Regulatory Commission as the representative of the market managers should introduce supporting policies and measures to curb the abnormal fluctuations in stocks.Second,we recommended that investors must be clear about the margin trading behavior bringing liquidation risk when Investors make the financing of buying and selling margin trading.Third,we proposed securities companies to strictly fulfill their social responsibilities.The company is a hub for connecting management and investors.On the one hand,the securities company should control leverage well in accordance with management.On the other hand,the securities company should popularize basic requirements of margin trading system and point out to investors for market benign operation of escort.The future direction of this paper is to study when a stock is taken out of the rang,we hope to expand the number of stocks,because the lack of serious data makes the empirical test results in this case lack of convincing.Secondly,in the choice of control variables,the regression results of many control variables are not significant that shows the design of the model needs to be improved.