Pro-cyclicality  of margin trading and short selling based on EMD method

doi:10.3969/j.issn.0253-2778.2020.08.015

Abstract

Abstract: The empirical mode decomposition (EMD) method was applied to measure the cyclical fluctuations of the stock index, and then used to study the pro-cyclicality of China’s margin trading and short selling. The research results show that margin trading has a positive pro-cyclical effect on the overall market, and short selling has a counter-cyclical affect. The vector autoregressive (VAR) model was applied to test the dynamic between margin trading and short selling and stock index. It was found that the impulse response of stock index to margin trading is positive, and the pro-cyclicality of margin trading aggravates the rise and fall of the market; the impulse response of stock index to short selling is negative but not significant, because the scale of securities lending is too small and its counter-cyclical effect can not stabilize the market.

Key words: margin trading and short selling, pro-cyclicality, empirical mode decomposition method, vector autoregressive model

CLC Number:

C812

PAN Wanbin,ZHANG Lian. Pro-cyclicality of margin trading and short selling based on EMD method[J]. Journal of University of Science and Technology of China, 2020, 50(8): 1144-1155.

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Pro-cyclicality of margin trading and short selling based on EMD method

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