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Margin Regulation and Stock Market Volatility
Author(s) -
HSIEH DAVID A.,
MILLER MERTON H.
Publication year - 1990
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1990.tb05078.x
Subject(s) - volatility (finance) , margin (machine learning) , stock (firearms) , economics , stock market , econometrics , financial economics , monetary economics , engineering , computer science , geography , machine learning , mechanical engineering , context (archaeology) , archaeology
Using daily and monthly stock returns we find no convincing evidence that Federal Reserve margin requirements have served to dampen stock market volatility. The contrary conclusion, expressed in recent papers by Hardouvelis (1988a, b), is traced to flaws in his test design. We do detect the expected negative relation between margin requirements and the amount of margin credit outstanding. We also confirm the recent finding by Schwert (1988) that changes in margin requirements by the Fed have tended to follow rather than lead changes in market volatility.