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Articles

Margin Trading, Short Selling Constraints and Stock Market Volatility

  • ZHU Guang-wei ,
  • YANG Tao ,
  • DU Zai-chao
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  • 1. Institute of Chinese Financial Studies, Southwestern University of Finance and Economics, Chengdu 611130, China;2. Business School, Shandong University, Weihai 264209, China;3. School of Economics, Fudan University, Shanghai 200433, China

Received date: 2019-02-17

  Revised date: 2020-11-30

  Online published: 2022-04-26

Abstract

Although a large number of classical theories and empirical literature prove that with the relaxation of short-selling constraints, stock prices are more likely to approach theirfundamental values.The positive effect of the short-selling mechanism has always been controversial.Regardless of the 2008 global financial crisis or the 2015 China stock market crash, governments all over the world imposed different degrees of restrictions on short-selling transactions in order to curb the stock price plummet during market panic. Even when the market is operating smoothly, governments have imposed different degrees of restrictions on short sales, thereby reducing potential risks.

Cite this article

ZHU Guang-wei , YANG Tao , DU Zai-chao . Margin Trading, Short Selling Constraints and Stock Market Volatility[J]. Chinese Journal of Management Science, 2022 , 30(4) : 13 -29 . DOI: 10.16381/j.cnki.issn1003-207x.2019.0216

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