Economics at your fingertips  

The Asymmetric Relation Between Margin Requirements and Stock Market Volatility Across Bull and Bear Markets

Gikas Hardouvelis (), Andreas Pericli and Panayiotis Theodossiou ()

No 1746, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: EGARCH-M models based on a daily, weekly, and monthly S&P–500 returns over the period October 1934–September 1994 reveal that higher margins have a much stronger negative relation to subsequent volatility in bull markets than in bear markets. Higher margins are also negatively related to subsequent conditional stock returns, apparently because they reduce systemic risk. These empirical regularities are consistent with the pyramiding-depyramiding framework of stock prices that US Congress had in mind when it instituted margin regulation in 1934, and suggest that a prudential rule for setting margins over time would be to raise them during periods of unwarranted price increases and to lower them immediately after large declines in stock prices.

Keywords: asymmetry; Credit; EGARCH model; Federal Reserve; Margin Requirements; Stock Prices; Volatility (search for similar items in EconPapers)
JEL-codes: G18 (search for similar items in EconPapers)
Date: 1997-11
References: Add references at CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link) (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at

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:

Ordering information: This working paper can be ordered from ... ers/dp.php?dpno=1746

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

Page updated 2019-11-15
Handle: RePEc:cpr:ceprdp:1746