Empirical Research on the Impact of Margin Trading on Liquidity and Volatility of Shanghai Security Market

Based on the data of Shanghai Security Market,this paper study the margin trading effects on the market liquidity and volatility.Empirical research results showed that in the Shanghai Security Market,margin trading mechanism have a long-term cointegration relationship with the market volatility,but not with the market liquidity,and margin trading is the Granger causal element of market liquidity and volatility.Using event study on the parametric or nonparametric tests of the individual stock inclusion and exclusion of new margin trading rage,we draw the conclusion that margin trading could stabilize the volatility of single stock and enhance stock liquidity.Finally,concerning the development of margin trading in China,we make further policy recommendations.