Abstract

We exploit threshold rules governing margin trading eligibility in India to identify a causal link between margin trading and increased comovement during crises. Margin trading explains more than one-quarter of the increase return comovement that we observe during crises. To understand the mechanisms driving this result, we evaluate the relative importance of stock connections through common brokers (who provide margin financing) versus common margin traders. We find that common brokers are most important. Margin-eligible stocks that are more connected through common brokers experience larger crisis-period increases in pairwise return comovement, especially when those brokers’ clients have experienced recent portfolio losses, when their clients have outstanding margin loans in more volatile stocks, and when the brokers are large. These findings are consistent with Brunnermeier and Pedersen (2009), in which initial shocks propagate due to the tightening of margin constraints imposed by financial intermediaries.

中文翻译：

---

危机期间的保证金交易和联名*

摘要

我们利用支配印度保证金交易资格的门槛规则来确定危机期间保证金交易与联动交易之间的因果关系。保证金交易解释了我们在危机期间观察到的四分之一以上的收益增加联动。为了理解推动这一结果的机制，我们评估了通过普通经纪人（提供保证金融资）与普通保证金交易者进行股票联系的相对重要性。我们发现普通经纪人是最重要的。通过普通经纪人联系更多的符合保证金要求的股票在成对的收益变动中经历了更大的危机期，特别是当这些经纪人的客户最近经历了投资组合损失，当他们的客户为波动性较大的股票提供未偿还的保证金贷款时，以及当经纪人大。