文档介绍：CREDIT TRADE AND VOLATILITY: EVIDENCE FROM NATURAL
EXPERIMENT OF CREDIT TRADE REGULATION IN CHINA ABSTRACT
Credit trade plays a great role in securities market, but there is no widely accepted theory on how credit trade affects the volatility of stocks. Therefore, the regulation in China may cause uncertainty as theories suggest that credit trade may lower the volatility or increase it. Available empirical studies examined impact of credit trade at market-wide level using time series analysis. The examination may not be such convinced for the reason that the scale of credit trade in China is too small to affect the market index effectively. Effect of credit trade on individual stock may be different from the market-wide, and more fundamental, thus we examine how credit trade affect volatility at individual stock level.
We use propensity score matching method (PSM) to minimize the selection bias and achieve the unbiased estimation of treatment effect. Moreover, we pose the volatility into systematic volatility and idiosyncratic volatility with CAPM. By PSM and DID(different in difference), our examination of how credit trade affect the volatility of 177 stocks which was into the credit trade list in 2011 shows that the total volatility and idiosyncratic volatility of individual stock is less when allowing credit trade, while no significant difference in systematic volatility. Our finding supports that credit trade would reduce the volatility in individual stock level. The impact of market-wide volatility can differ significant from the impact of individual volatility, for the reasons such as idiosyncratic volatility could be diversified away. In this sense, there is a serious possibility that individual stocks would affect the market index through systematic volatility, and we pute that credit trade may not increase the market-wide volatility even when the scale of credit trade get development.
KEY WORDS: Credit Trade; Individual Stock Volatility; PSM; Idiosyncra