Margin trading and spillover effects: Evidence from the Chinese stock markets

Shengjie Zhou and Qing Ye

Emerging Markets Review, 2023, vol. 54, issue C

Abstract: Using a sample of Chinese stocks, we demonstrate that liquidity and return in stocks with margin trading can spread to other stocks causing spillover effects. Furthermore, the level of margin interest has a positive relation with the degree of spillover effects from relevant stocks. In addition to the deleverage mechanism which has received support from recent studies, we propose the cross-asset learning behavior in stock markets as a new mechanism to explain such relation. The mediation models suggest that the cross-asset learning mechanism can explain a large proportion of the relation between margin trading and spillover effects in stock markets.

Keywords: Margin trading; Spillover effect; Deleverage; Cross-asset learning; Chinese stock market (search for similar items in EconPapers)
JEL-codes: G10 G15 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:54:y:2023:i:c:s1566014123000109

DOI: 10.1016/j.ememar.2023.101005

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