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The Differential Impact of Federal Reserve Margin Requirements on Stock Return Volatility
Author(s) -
Kumar Raman,
Ferris Stephen P.,
Chance Don M.
Publication year - 1991
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1991.tb00385.x
Subject(s) - volatility (finance) , portfolio , margin (machine learning) , economics , gross margin , stock (firearms) , stock price , financial economics , econometrics , monetary economics , finance , profitability index , computer science , engineering , biology , mechanical engineering , paleontology , machine learning , series (stratigraphy)
This study examines the effect of changes in margin requirements on stock price volatility. We examine the possibility that the impact of margin requirements varies with a stock's degree of speculative interest. Using four alternative measures of speculative interest, we divide our sample into ten portfolios. We find no consistent evidence of a relationship between margin requirements and changes in volatility for any portfolio. The inconsistent and often contradictory results produced by these changes question its usefulness by Federal Reserve decision makers.