Margin buying activity and stock market trading in China: Is there a connection?
研究中国融资买入活动与股票市场交易之间的动态关联，发现两者高度相关且存在双向风险溢出，股票市场交易在风险传递中占主导地位，对监管者和投资者有重要启示。
Abstract This paper examines the dynamic linkage between margin buying activity and stock market trading in China. Built upon a multivariate DCC‐GJRGARCH model and the spillover index method, the results highlight a high dynamic conditional correlation between margin buying activity and stock market trading which shows apparent time‐varying features. Furthermore, there is a two‐way risk‐spillover relationship, with stock market trading playing a dominant role in risk transmission. More importantly, the level of risk contagion actually varies over time due to certain large external shocks. Margin buying activity tends to be a mean risk‐spillover receiver most time, whereas it acts as both a volatility risk‐spillover transmitter and a receiver over the entire sample period. The analysis thus implies that margin buying activity does have a close interrelationship with stock market trading in China, which has important implications for both regulators and investors.