The Impact of Margin Trading Mechanism on Stock Mispricing: Evidence from a Difference-in-Differences Approach

Xue Yu and Wei Huang ()
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Xue Yu: Jingdezhen University
Wei Huang: Jingdezhen University

A chapter in Proceedings of the 2026 11th International Conference on Financial Innovation and Economic Development (ICFIED 2026), 2026, pp 321-327 from Springer

Abstract: Abstract The margin trading and short selling mechanism, as a significant institutional innovation in China’s capital market, has drawn considerable attention regarding its impact on stock mispricing. This study selects China’s A-share market from 2007 to 2017 and employs the pilot implementation in 2010 and subsequent batch expansions of the margin trading system as a quasi-natural experiment. Using a Difference-in-Differences (DID) model, this paper investigates the effect of the margin trading mechanism on stock mispricing. The treatment group consists of stocks included in the margin trading list, while the control group comprises non-listed stocks. Empirical results indicate that the implementation of the margin trading mechanism significantly reduces industry-level mispricing. Robustness checks, including parallel trend tests and Propensity Score Matching (PSM), confirm the findings.

Keywords: Margin Trading and Short Selling; Stock Mispricing; Difference-in-Differences Model; Pricing Efficiency; A-Share Market (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6239-642-5_33

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DOI: 10.2991/978-94-6239-642-5_33

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