Fuqua School of Business, Duke University; Graduate School of Business, University of Chicago. The authors thank John Cochrane, Wayne Ferson, Ed George, Milton Harris, John Huizinga, Laurentius Marais, Richard Roll, Peter Rossi, Michael Salinger, William Schwert, Andrei Schleifer, and Lester Telser for helpful discussion.
Margin Regulation and Stock Market Volatility
Article first published online: 30 APR 2012
1990 The American Finance Association
The Journal of Finance
Volume 45, Issue 1, pages 3–29, March 1990
How to Cite
HSIEH, D. A. and MILLER, M. H. (1990), Margin Regulation and Stock Market Volatility. The Journal of Finance, 45: 3–29. doi: 10.1111/j.1540-6261.1990.tb05078.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
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.