An Empirical Study of the Impact of Margin Trading on the Volatility of Shenzhen Stock Market

The impact of margin trading on the volatility of the stock market is still debated in the academic circles. This paper selects the datas of Shenzhen stock market to test it with the VAR model analysis and Granger causality test. The quality of a stock market can be measured from three aspects of volatility, transparency and effectiveness, but the transparency and effectiveness do not have exact data for quantitative analysis. This paper focuses on the impact of margin trading on volatility. This paper is organized as follows. First of all, this article introduces the research background, and then reviews the results of theoretical studies abroad based on the theory, namely margin trading can reduce volatility in Shenzhen stock market in China. The empirical part, through the VAR model analysis and Grainger causality test, draws the following conclusion. Margin trading can reduce the volatility of the stock market. Margin trading and stock market volatility are each other’s Grainger reasons.