Investors’ Margin Trading Behavior In China’s Stock Market And Its Impact On The Market

The margin trading system is an important system in China’s capital market.Compared with ordinary securities trading,margin trading not only provides leverage mechanism,but also introduces short selling mechanism to open "bilateral trading" in the stock market.Different from the previous studies on the impact of margin trading system on China’s stock market mainly by using the double difference method,this paper deeply studies the micro-trading behavior of margin trading,and combines the market anomalies to study whether China’s margin trading system can effectively reduce the arbitrage constraint and improve the asset pricing efficiency of China’s capital market.In this paper,the development of China’s margin trading market is divided into three stages: preliminary development,normative adjustment and recovery development.The study finds that China’s margin traders tend to increase margin buying after the stock price rises,and reduce margin buying after the stock price falls,that is,adopt the momentum trading behavior of "follow the trend and follow the trend".China’s margin traders only adopted the momentum trading strategy of "follow the trend to kill the fall" at the initial stage of the development of margin trading.After entering the normative adjustment and recovery development stage,China’s margin traders changed from "follow the trend to kill the fall" trading mode to "resist the rise" trading mode,and gradually played the role of market arbitrage.Further research on the long and short portfolios constructed by the portfolio spread method found that the short sale of securities did indeed predict the decline of future returns,and the regression results of Fama and Macbeth(1973)models also showed that the balance ratio of short sale of securities had a significant negative impact on future returns.However,the financing transaction does not predict the increase of future income,but shows the reversal of income,that is,the larger the proportion of financing balance,the worse the performance of future income.Based on the arbitrage behavior of the margin traders in China,this paper uses the portfolio spread method to construct the long and short portfolios by distinguishing the target portfolio of margin trading and nontarget portfolio,and finds that the "idiosyncratic volatility anomalies" and "sentiment anomalies" under the sample of margin trading with small arbitrage constraints have been alleviated,indicating that China’s margin trading system effectively reduces the arbitrage constraints and market anomalies,Improve the pricing efficiency of the capital market.At the same time,based on the empirical results and the adjustment of the margin trading policy,this paper puts forward the following suggestions:(1)For investors,strengthen investor education,improve the awareness of short selling of market investors,encourage investors to explore the negative news of listed companies,and improve the information content of stock prices;(2)For securities companies,securities companies should be encouraged to set the conversion rate and scope of collateral differently,reduce the "leverage" attribute of margin trading,optimize the extension management,and reduce the "speculative" attribute of margin trading;(3)For the securities regulatory authority,it should steadily expand the scope of margin trading,deepen the reform of refinancing securities lending and refinancing trading system,expand the scope of securities lending,and activate the margin trading market.