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Research on the effect of short - selling mechanism on A - share volatility in China

Feng, Xiuhan (2020) Research on the effect of short - selling mechanism on A - share volatility in China. Masters thesis, Dublin, National College of Ireland.

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Abstract

At present China pay more and more attention to the ability of direct financing of the stock market, and financing efficiency is limited by the market mechanism, in the Chinese stock market has been the single market before 2010, often resulting in the stock market boom collapsed, increase of market risk will no doubt stop many internal and outside investors to affect its role in equity markets. In 2010, margin and short-selling and stock index futures trading systems were introduced to make up for the absence of short selling mechanism for the smooth operation of the stock market. On the one hand, short-selling can restrain the unreasonable rise of stock prices and enhance market liquidity; on the other hand, when the market is in a bear market cycle, it will increase the risk of stock market crash. Therefore, whether the launch of the shorting mechanism can play a role in stabilizing the market needs to be further studied.

On the basis of theoretical analysis and empirical analysis, this paper first introduces the development status of margin trading and short selling business, the choice of different margin trading and short selling business modes and the existing problems in China's short selling mechanism. This paper uses VAR model and GARCH model to select the underlying stocks launched from March 31, 2010 to December 31, 2015 for empirical analysis. The empirical results show that margin trading and short selling have no significant impact on market volatility in these five years, but they have increased market liquidity. Finally, the article combines the problems existing and the empirical results to put forward relevant suggestions.

Key words
Margin trading and short selling; Volatility; VAR model; GARCH (1,1)

Item Type: Thesis (Masters)
Subjects: H Social Sciences > Economics
H Social Sciences > HG Finance > Investment > Investment Strategy
H Social Sciences > HG Finance > Investment > Stock Exchange
Divisions: School of Business > Master of Science in Finance
Depositing User: Dan English
Date Deposited: 15 Feb 2021 14:48
Last Modified: 15 Feb 2021 14:48
URI: http://norma.ncirl.ie/id/eprint/4761

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