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Pro-cyclicality of margin trading and short selling based on EMD method

  • School of Management,University of Science and Technology of China,Hefei 230026,China

Cite this: JUSTC, 2020, 50(8): 1144-1155
https://doi.org/10.3969/j.issn.0253-2778.2020.08.015
CSTR: 32290.14.j.issn.0253-2778.2020.08.015
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  • Received Date: June 28, 2020
  • Revised Date: July 24, 2020
  • Accepted Date: July 24, 2020
  • Published Date: August 30, 2020
    Abstract
  • The empirical mode decomposition (EMD) method was applied to measure the cyclical fluctuations of the stock index, and then used to study the pro-cyclicality of China’s margin trading and short selling. The research results show that margin trading has a positive pro-cyclical effect on the overall market, and short selling has a counter-cyclical affect. The vector autoregressive (VAR) model was applied to test the dynamic between margin trading and short selling and stock index. It was found that the impulse response of stock index to margin trading is positive, and the pro-cyclicality of margin trading aggravates the rise and fall of the market; the impulse response of stock index to short selling is negative but not significant, because the scale of securities lending is too small and its counter-cyclical effect can not stabilize the market.
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    2020 No. 8 Volume 50 Issue 8 PP. 1144-1155
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