The effect of differentiated margin on futures market investors' behavior and structure

Jin‐hui Luo, Di‐fang Wan, Yang Yang and Guang Yang

China Finance Review International, 2011, vol. 1, issue 2, 133-151

Abstract: Purpose - The purpose of this paper is to empirically analyze the role of differentiated margin system in leading investors' investing behavior and then optimize investor structure in futures markets. Design/methodology/approach - Using economic experimental research method, this paper designs and conducts a futures market experiment according to experimental research's basic norms, thus acquiring needed and credible empirical data. Findings - By analyzing the experimental data, it is found that compared with situations in futures markets that implement uniform margin system, investors' (especially speculators') futures open position and the ratio of their open position and futures turnover are both significantly higher, in futures markets that implement differentiated margin system. On the other hand, differentiated margin system has no effects on hedgers' futures turnover, but significantly reduces speculators' futures turnover. Research limitations/implications - The findings suggest that compared with uniform margin system, differentiated margin system is beneficial to effectively restrict both speculators' and hedgers' speculating behavior and lead hedgers' market participation. Practical implications - In order to resolve the problem of unreasonable investor structure in China's futures market, i.e. lack of hedgers and over‐speculating, China's futures market's regulators should reform the margin system and adopt differentiated margin system to lead investors' rational behavior and optimize investor structure. Originality/value - This paper empirically analyzes and verifies, for the first time, the roles of differentiated margin system in affecting investors' investing behavior. The futures market experiment designed and used in this study is a pioneering and exploratory experiment.

Keywords: China; Investors; Futures markets (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:cfripp:v:1:y:2011:i:2:p:133-151

DOI: 10.1108/20441391111100723

Access Statistics for this article

China Finance Review International is currently edited by Professor Chongfeng Wu and Professor Haitao Li

More articles in China Finance Review International from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().