Research on the margin of futures markets and the policy spillover effect

Difang Wan; Yang Yang; Dong Fang; Guang Yang

doi:10.1108/20441391111092255

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China Finance Review International

ISSN: 2044-1398

Online from: 2011

Subject Area: Accounting and Finance

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Research on the margin of futures markets and the policy spillover effect

Document Information:
Title:	Research on the margin of futures markets and the policy spillover effect
Author(s):	Difang Wan, (School of Management, Xi'an Jiaotong University, Xi'an, China), Yang Yang, (School of Management, Xi'an Jiaotong University, Xi'an, China), Dong Fang, (School of Management, Xi'an Jiaotong University, Xi'an, China), Guang Yang, (School of Management, Xi'an Jiaotong University, Xi'an, China and Department of the 1st Branch Futures Supervision of China Securities Regulatory Commission, Beijing, China)
Citation:	Difang Wan, Yang Yang, Dong Fang, Guang Yang, (2011) "Research on the margin of futures markets and the policy spillover effect", China Finance Review International, Vol. 1 Iss: 1, pp.34 - 56
Keywords:	China, Futures markets, Government policy, Hedging, Stock exchanges
Article type:	Research paper
DOI:	10.1108/20441391111092255 (Permanent URL)
Publisher:	Emerald Group Publishing Limited
Acknowledgements:	The paper is a staged achievement of the research group and Shanghai Futures Exchange on the subject of “The Investor Structure and Behaviour Analysis of Futures Market”. It is under the sponsorship of Innovative Group Projects of Chinese National Natural Science Foundation (No. 70121001) and the second phase of “985 Project” of Xi'an Jiaotong University (No. 07200701). The authors would like to thank them all. The authors are also grateful to the anonymous referees for helpful comments and suggestions. The views are the authors', as of course are all the errors.
Abstract:	Purpose – The purpose of this paper is to investigate whether the change of margin in Chinese futures markets has policy spillover effects. Design/methodology/approach – The paper constructs a model based on Harzmark and on Chng, taking Chinese futures markets status quo as a single species and restrictions on foreign investment into consideration, introduces the assumptions of spillover effect of speculators, then obtains investor's demand function. Subsequently, the effects of Shanghai Futures Exchange's 11 instances of margin changing are analyzed. Findings – The paper finds that in the Chinese futures market, margin changing has impact on the open interest (OI) and the speculator spillover effect is validated. Research limitations/implications – The irrational behavior of investors in markets is not taken into account in the model and data about spillover speculators were not directly available. Originality/value – The paper usefully analyzes the effects of the Shanghai Futures Exchange's 11 instances of margin changing from 2000 to 2007 and examines the actual effects of margin-changing policy, in the views of OI, trading volume and the externality, the results showing that margin changing has impact on investor structure and validates the existence of the assumed speculator spillover effect.