Abstract: This study assesses the state of the policy debate that surrounds the
federal regulation of margin requirements. A relatively comprehensive
review of the literature finds no undisputed evidence that supports
the hypothesis that margin requirements can be used to control stock
return volatility and correspondingly little evidence that suggests
that margin-related leverage is an important underlying source of
"excess" volatility. The evidence does not support the hypothesis
that there is a stable inverse relationship between the level of
Regulation T margin requirements and stock returns volatility nor does
it support the hypothesis that the leverage advantage in equity
derivative products is a source of additional returns volatility in
the stock market.
Keywords: Margin requirements, volatility, leverage
Full paper (265 KB PDF)
| Full paper (264 KB Postscript)
Home | Economic research and data | FR working papers | FEDS | 1997 FEDS papers
Accessibility
To comment on this site, please fill out our feedback form.
Last update: July 16, 1997
|