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Margin trading and comovement during crises

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 m...

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Publication status:
Published
Peer review status:
Peer reviewed

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Publisher copy:
10.1093/rof/rfz019

Authors


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Institution:
University of Oxford
Division:
SSD
Department:
Saïd Business School
Role:
Author
More by this author
Institution:
University of Oxford
Division:
SSD
Department:
Saïd Business School
Role:
Author
Publisher:
Oxford University Press Publisher's website
Journal:
Review of Finance Journal website
Volume:
24
Issue:
4
Pages:
813–846
Publication date:
2019-09-27
Acceptance date:
2019-08-27
DOI:
EISSN:
1573-692X
ISSN:
1572-3097
Language:
English
Keywords:
Subjects:
Pubs id:
pubs:1047925
UUID:
uuid:c7ad5015-7b28-4610-9ed5-981f45903724
Local pid:
pubs:1047925
Source identifiers:
1047925
Deposit date:
2019-08-28

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