Margin purchases, short sales and stock return volatility in China: Evidence from the COVID-19 outbreak

In this paper, we investigate the effects of margin purchases and short sales on the return volatility in the Chinese stock market during the COVID-19 outbreak. We present two main findings. First, we show that stocks with higher level of margin-trading activity exhibit higher return volatility. The...

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Detalles Bibliográficos
Autores principales: Lin, Yongjia, Wang, Yizhi, Fu, Xiaoqing (Maggie)
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Elsevier Inc. 2022
Materias:
Article
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8994448/
https://www.ncbi.nlm.nih.gov/pubmed/35431673
http://dx.doi.org/10.1016/j.frl.2021.102351
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author Lin, Yongjia
Wang, Yizhi
Fu, Xiaoqing (Maggie)
author_facet Lin, Yongjia
Wang, Yizhi
Fu, Xiaoqing (Maggie)
author_sort Lin, Yongjia
collection PubMed
description In this paper, we investigate the effects of margin purchases and short sales on the return volatility in the Chinese stock market during the COVID-19 outbreak. We present two main findings. First, we show that stocks with higher level of margin-trading activity exhibit higher return volatility. The COVID-19 outbreak amplifies the destabilizing effects of margin-trading activity. Second, no evidence shows that short selling destabilizes the stock market in general. However, we observe that intensified short-selling activity is associated with lower return volatility when infection risk is high during the COVID-19 crisis.
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spelling pubmed-89944482022-04-11 Margin purchases, short sales and stock return volatility in China: Evidence from the COVID-19 outbreak Lin, Yongjia Wang, Yizhi Fu, Xiaoqing (Maggie) Financ Res Lett Article In this paper, we investigate the effects of margin purchases and short sales on the return volatility in the Chinese stock market during the COVID-19 outbreak. We present two main findings. First, we show that stocks with higher level of margin-trading activity exhibit higher return volatility. The COVID-19 outbreak amplifies the destabilizing effects of margin-trading activity. Second, no evidence shows that short selling destabilizes the stock market in general. However, we observe that intensified short-selling activity is associated with lower return volatility when infection risk is high during the COVID-19 crisis. Elsevier Inc. 2022-05 2021-07-21 /pmc/articles/PMC8994448/ /pubmed/35431673 http://dx.doi.org/10.1016/j.frl.2021.102351 Text en © 2021 Elsevier Inc. All rights reserved. Since January 2020 Elsevier has created a COVID-19 resource centre with free information in English and Mandarin on the novel coronavirus COVID-19. The COVID-19 resource centre is hosted on Elsevier Connect, the company's public news and information website. Elsevier hereby grants permission to make all its COVID-19-related research that is available on the COVID-19 resource centre - including this research content - immediately available in PubMed Central and other publicly funded repositories, such as the WHO COVID database with rights for unrestricted research re-use and analyses in any form or by any means with acknowledgement of the original source. These permissions are granted for free by Elsevier for as long as the COVID-19 resource centre remains active.
spellingShingle Article
Lin, Yongjia
Wang, Yizhi
Fu, Xiaoqing (Maggie)
Margin purchases, short sales and stock return volatility in China: Evidence from the COVID-19 outbreak
title Margin purchases, short sales and stock return volatility in China: Evidence from the COVID-19 outbreak
title_full Margin purchases, short sales and stock return volatility in China: Evidence from the COVID-19 outbreak
title_fullStr Margin purchases, short sales and stock return volatility in China: Evidence from the COVID-19 outbreak
title_full_unstemmed Margin purchases, short sales and stock return volatility in China: Evidence from the COVID-19 outbreak
title_short Margin purchases, short sales and stock return volatility in China: Evidence from the COVID-19 outbreak
title_sort margin purchases, short sales and stock return volatility in china: evidence from the covid-19 outbreak
topic Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8994448/
https://www.ncbi.nlm.nih.gov/pubmed/35431673
http://dx.doi.org/10.1016/j.frl.2021.102351
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