Margin Requirements, Volatility, and Market Integrity: What Have We Learned Since the Crash?
40 Pages Posted: 3 Dec 1997
Date Written: April 22, 1997
Abstract
This study assesses the state of the policy debate that surrounds the Federal regulation of margin requirements. A relatively comprehensive review of the literature finds no undisputed evidence that supports the hypothesis that margin requirements can be used to control stock return volatility and correspondingly little evidence that suggests that margin-related leverage is an important underlying source of ``excess'' volatility. The evidence does not support the hypothesis that there is a stable inverse relationship between the level of Regulation T margin requirements and stock returns volatility nor does it support the hypothesis that the leverage advantage in equity derivative products is a source of additional returns volatility in the stock market.
JEL Classification: G28
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Liquidity Provision During Circuit Breakers and Extreme Market Movements
-
By William G. Christie, Shane A. Corwin, ...
-
Bubbles in Experimental Asset Markets: Irrational Exuberance No More
By Lucy F. Ackert, Narat Charupat, ...
-
Switching to a Temporary Call Auction in Times of High Uncertainty
By David Abad and Roberto Pascual
-
Price Limits: How Effective? Evidence from the Istanbul Stock Exchange
By Recep Bildik and Guzhan Gulay
-
By Yong H. Kim, José Yagüe, ...
-
On the Magnet Effect of Price Limits
By David Abad and Roberto Pascual
-
The Effect of Price Limits on Intraday Volatility and Information Asymmetry
By Yong H. Kim and J. Jimmy Yang