Do Margin Requirements Affect Asset Prices? | Zendy

Bruno Giovannetti | Zendy; Guilherme Batistella Martins | Zendy

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Do Margin Requirements Affect Asset Prices?

Author(s) -

Bruno Giovannetti,

Guilherme Batistella Martins

Publication year - 2012

Publication title -

ssrn electronic journal

Language(s) - English

Resource type - Journals

ISSN - 1556-5068

DOI - 10.2139/ssrn.1947027

Subject(s) - margin (machine learning) , asset (computer security) , economics , affect (linguistics) , capital asset pricing model , monetary economics , aggregate (composite) , financial economics , systematic risk , empirical evidence , econometrics , business , computer security , machine learning , computer science , philosophy , linguistics , materials science , epistemology , composite material

Some recent theoretical papers show that margin requirements can affect asset prices. Such results are important, for example, to understand the unconventional polices implemented by the Fed during the financial crisis of 2007-2010. However, empirical evidence remains scarce. The present article contributes to filling this gap. It shows that an aggregate margin factor predicts future excess returns of the S&P 500, and that stocks with high exposures to the ted spread pay on average higher risk-adjusted returns. Both findings are in accordance with the theory that relates margins and prices.

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