Margin Trading Research Articles

Firm size‐specific trade effects of regional trade agreements: Estimating extensive and intensive margins of trade

AbstractWe estimate the impacts of Korean firms’ participation in regional trade agreements (RTAs) on the extensive and intensive export margins by identifying exporting firms based on their firm size—small and medium‐sized enterprises (SMEs) and large enterprises (LEs) at the 5 399 HS six‐digit commodity level—and specifying characteristics of RTAs from 2004 to 2015. We apply the EK Tobit estimation technique to control zero trade and the OLS estimation with importer‐product and time fixed effects to alleviate the endogeneity problem. We find that firm size, product type, and depth of RTA significantly matter. Specifically, we find that deeper RTAs with larger, developing, and closer members significantly enhance the export creation effects of SMEs and LEs. Regarding the firm size‐specific effects, we find that SMEs are less sensitive to exploiting RTA participation but more sensitive to the import market size, bilateral and relative trade costs, and the RTA characteristics. LEs’ export creation is mainly driven by the intensive margin, while SMEs’ export creation is driven by extensive and intensive margins (slightly more by the extensive margin). For the product‐specific effects, we find that Korea's major exportable products such as chemicals, basic metals, motor vehicles, and transport equipment generate significantly strong export creation effects for both LEs and SMEs through their participation in RTAs.

Margin trading and spillover effects: Evidence from the Chinese stock markets

Using a sample of Chinese stocks, we demonstrate that liquidity and return in stocks with margin trading can spread to other stocks causing spillover effects. Furthermore, the level of margin interest has a positive relation with the degree of spillover effects from relevant stocks. In addition to the deleverage mechanism which has received support from recent studies, we propose the cross-asset learning behavior in stock markets as a new mechanism to explain such relation. The mediation models suggest that the cross-asset learning mechanism can explain a large proportion of the relation between margin trading and spillover effects in stock markets.

Bank‐intermediated trade finance and the intensive margin of African trade

AbstractThis paper presents evidence on the importance of bank‐intermediated trade finance for the intensive margin of African trade, using unique data from 43 African countries. It shows that African trade is underserved by banks. Banks intermediate about 40% of the region's trade – a far lower share than the global average of 80%. It finds that bank‐intermediated finance has a positive and significant effect on the intensive margin of African trade, even after accounting for the impact of domestic credit to the private sector. Estimates from standardised coefficients show that the impact of access to trade finance on trade volume for Africa is large and exceeds that of exchange rate volatility and trade logistics. These results suggest that policies aimed at promoting the region's trade should make access to bank‐intermediated finance a priority.

Power Symmetry in Global Value Chains: Evidence from the Russian Retail Market

Value chain management actively studies sources and types of interfirm power because increasing power symmetry between partners fosters innovativeness and adaptability to a market context. This study focuses on global value chains (GVCs) as a special type of value chains that experiences substantial influence of collective power. In the analysis I attempt to demonstrate higher power symmetry between partners inside a GVC than in other value chains. This hypothesis is based on a combination of resource dependence, mutual dependence, and social exchange/social embeddedness approaches with the analysis of structure in a GVC. The paper uses data from four waves of a survey conducted in Russia between 2010–2019 that include more than 2.700 managers of both buyers and suppliers. (OLS) and logit regression models were built for the analysis. The results demonstrate that partners inside GVCs share trade margins more symmetrically, have more equal negotiation power, and are more intensively involved in social exchanges through informal support.

Margin Trading and Corporate Investment: Evidence from a Deregulation Experiment in China

Margin Trading and Corporate Investment: Evidence from a Deregulation Experiment in China

Should Firms Strive for the Educational Diversity of the Workforce? Estimation of the Impact of Firms’ Educational Structure on Sales Growth and Exports

This study analyses the relationship between a firms’ growth and the educational diversity of their workforce. It differentiates itself from other studies by using two measures of human capital diversity—one for education levels and one for fields—instead of one. The results show that workers with more diverse specializations than the workforce of competitors benefit the firm’s growth and extensive margin of trade. Contrastingly, above-average workforce heterogeneity in education levels does not seem to affect firms’ performance. Furthermore, it is shown that the association between human capital diversity and firms’ performance differs among sectors. Compared to previous studies, which concentrated on one particular industry or one measure of educational diversity, this more comprehensive approach allows reconciling some of the contradicting results. The study shows that the mixed results in existing papers can result from dissimilar impacts of various measures of human capital diversity on firm performance or its differences among sectors.

The sickle and the garlic chives: Volatility in the Chinese stock market

AbstractThis essay explores the meaning that volatility assumes in the Chinese stock market context. Drawing on discussions from ‘mom and pop’ online forums, it argues investors operate in a relational position with the Chinese state regulators that both sustain and threaten their market activities. Chinese stock markets are known to be the most volatile in the world. To face the state's arbitrary intervention in the market, investors must constantly juggle the options of either leaning on and trusting the regulators’ capacity to protect and rescue their stocks or engaging in risky margin trading and short-selling activities. This contradictory behavior is reflected in the popular self-mocking meme that keeps circulating in investors online forums, the one of the jiucai (meaning ‘garlic chives’). The investors often use it with irony to describe their own tendency to throw cash into the markets again and again, hoping to regain the money they lost in previous investments, never learning a lesson. Linking the financial with the biopolitical dimension, the essay takes the jiucai meme to show the extent to which volatility points to the production of new subjects whose resilience involves the adoption of practices of speculation to conjure a future for themselves that is reborn multiple times.

融资融券交易对节能环保股价波动影响的实证分析

融资融券交易对节能环保股价波动影响的实证分析

Legal Understanding of Management Decisions in Hydrocarbons Cross-Border Marine Shipping: Digital Hedging Technologies

The paper examines one of the areas of law application that is methodologically based on an individualized approach to the norms of law with their subsequent broad interpretation in relation to specific legal situations. Similarly, the vector of rule-making is determined in relation to the transportation of crude oil and its refined products entirely by sea. The work not only reflects the basic doctrines of legal understanding, but also presents an assessment of their law enforcement potential, the ability to influence the formation of sectoral, intersectoral institutions of law. The author examines financial intermediation and hedging that performs the same dealer functions, but with much lower costs than classical banking institutions. Implementation of the institution of a derivative credit instrument in law enforcement practice is of particular interest to the author. The paper considers such a phenomenon as confrontation between natural and positive law in the context of entrepreneurial activity. Transportation of petroleum products’ tenders is considered as a compensated use of property. The positivist legal understanding is seen by the author as no less important. The paper explains to what extent it can serve as a basis for making management decisions concerning market risks, risks of changes in portfolios of financial instruments, risks of probable losses.Transactions with a digital asset quite reasonably belong to the field of hedging, if there is a causal relationship between the types of the underlying asset and the hedging strategy, using digital examples. Connecting factors to the law of the payment currency, terms and amounts of payments are considered both in line with hedging strategies and utilitarially in the context of making a record of the rights’ transfer. The author draws a conclusion concerning the purpose of short and long positions of net assets hedged against margin trading limits if the security of an oil transportation transaction is found to be insufficient. Merchants receive borrowed capital secured by their own assets.Management solutions ensure the sequence of identification of all relevant risks, facilitate attracting exclusively licensed counterparties for the formation of loan coverage, regularly replenishing the reserves of liquid funds when conducting transactions with virtual currencies and other impersonal (in personal terms) assets. With management decisions being considered as one of the measures of value, hedging is similar to a loan agreement, since they have a common goal — to gain mandatory tranche for the derivative financial instruments that invariably maintain a high level of liquidity and volatility.

Analisis Praktik Trading Saham Syariah Dalam Perspektif Hukum Ekonomi Syariah Studi Kasus IDX Kalimantan Selatan

This study aims to analyze the practice of Islamic stock trading in the perspective of Islamic economic law, the case study of the Indonesia Stock Exchange (IDX) in South Kalimantan. Using a qualitative research method with a field research approach, the author goes directly to the field to conduct observations and interviews related to the Islamic stock trading system at Indonesia Stock Exchange (IDX) South Kalimantan. The object of this research is Sharia Stock Trading Practice. The results of this study are that the mechanism for trading in Indonesian sharia shares uses Sharia Online Trading System (SOTS), namely the omission of the Margin Trading and Short Selling features and the shares traded may only be shares included in the Sharia Securities flat. Even though using the Sharia Online Trading System (SOTS) system, it turns out that several transaction activities that are prohibited by Fatwa of the National Sharia Council of the Indonesian Ulema Council include fake demand/supply, pump and dump, cornering, heading behavior and fear of missing out. In the perspective of sharia economic law, the practice of trading sharia shares in a trading mechanism has been declared to be in accordance with the findings of several prohibited practices, which can make the practice of trading sharia shares inconsistent with the principles of sharia economic law.

Scenarios of the domestic oil and fat industry

The production and industrial processing of oil-containing raw materials is a strategic task for the economy of the Republic of Kazakhstan. Domestic producers have the opportunity to dominate not only in the Central Asian region, but also to expand export flows along the developed transport routes. In addition, development of oil and fat industry of the republic will significantly reduce the impact of foreign intervention supplies on domestic market. The goal – is to identify the trends of main world players, as well as to determine the growth points of oil and fat subcomplex. The study used methods – to analyze the world branch economy: information from specialized sources and publications, official statistics from the US Department of Agriculture, foreign agricultural service of the sector "Oil crops: world markets and trade", consultations with Kazakhstani analysts in the field of agriculture, materials on the topic from open sources. Results – key global trends are identified, the average per capita consumption of vegetable oils in Kazakhstan is determined. Soybean, palm, sunflower, rapeseed and safflower are the main oil crops in the world and local space, the importance of legumes is noted. Besides exotic ones - palm trees and olives, almost all oilseed plants, which determine the global industry structure, are grown in the country. In terms of production and export of linseed oil and oil seeds, Kazakhstan producers are in the world's leading positions. The influence of restrictive anti-covid measures on production of vegetable oils is shown. An example of wholesale and retail trade is given, where a fixed trade margin for retail goods is applied. Conclusions – in the Republic of Kazakhstan there is a significant potential that can provide a dominant position in regional market and can become a catalyst for inter-industry mutually beneficial relations in food sector, fodder production and animal husbandry.

Techno-Economic Assessment of an Office-Based Indoor Farming Unit

Decentralized, smart indoor cultivation systems can produce herbs and vegetables for fresh and healthy daily nutrition of the urban population. This study assesses technical and resource requirements, productivity, and economic viability of the “Smart Office Farm” (SOF), based on a 5-week production cycle of curled lettuce, lolo rosso, pak choi and basil at three photosynthetic photon flux density (PPFD) levels using a randomized block design. The total fresh matter yield of consumable biomass of all crops was 2.5 kg m−2 with operating expenses (without labor costs) of EUR 53.14 kg−1; more than twice as expensive compared to large-scale vertical farm and open-field cultivation. However, there is no need to add trade margins and transportation costs. The electricity supply to SOF is 73%, by far the largest contributor to operational costs of office-based crop production. Energetic optimizations such as a more homogeneous PPFD distribution at the plant level, as well as adaptation of light quality and quantity to crop needs can increase the economic viability of such small indoor farms. With reduced production costs, urban indoor growing systems such as SOF can become a viable option for supporting fresh and healthy daily nutrition in urban environments.

Multi-objective interval portfolio optimization modeling and solving for margin trading

Margin trading is an important part of stock market. Compared with traditional channel business, it brings excess profits to both financial institutions and investors. As an important optimization problem in the field of finance, portfolio optimization with the purpose of spreading risks and improving returns is the essence of margin trading. In this paper, aiming at achieving the portfolio optimization for multi-period margin trading, we propose a multi-objective interval portfolio optimization method, including model construction and optimization. Based on real business rules, the process of model construction consists of three steps. First, an interval estimation method of securities’ returns and risks is designed according to market feedback to keep portfolios remaining robust under the market fluctuation. Second, a multi-objective problem of maximizing return and minimizing risk is constructed to seek portfolios with balanced risks and returns. Third, a rolling investment mechanism is formed based on the portfolio’s actual return of each period to maintain effective continuous investment. For the model optimization, a multi-objective interval optimization evolutionary algorithm with knee based decision-making is developed. It obtains knee solutions for different risk segments to meet the investment needs of investors with different risk preferences, so that their investment decisions do not need to rely on quantitative expression of their preferences. Furthermore, adapting to the interval model, an interval optimization method is developed to enhance the robustness of knee points. Experimental results on several benchmark problems and the real portfolio optimization problem demonstrate the superiority of the proposed model and algorithm.

Could spillovers from multinationals affect the trade activities of local firms?

This paper examines spillovers from foreign affiliates of multinationals on various margins of trade of local firms. We find that a larger foreign presence in the same region crowds out the trade activity of local firms, resulting in a reduction of the number of products imported and exported, as well as of the number of origins where imports are sourced from. Supply chain linkages with foreign affiliates are instead found to help local firms to diversify their exports and imports. Engagement in R&D activity allows local firms to mitigate some of the negative effects of the presence of foreign-owned firms in the same region, and enhances the local firms’ gains arising through forward linkages. • Local firms in the same region as MNEs concentrate trade on fewer products and markets. • Local firms in the same sector as MNEs expand the range of export destinations. • Supplying MNEs results in local firms exporting a larger number of products. • Buying from MNEs enables local firms to enter new markets as exporters and importers. • R&D is a conduit for absorbing knowledge when buying inputs from MNEs.

The Trade Growth under the EU–SADC Economic Partnership Agreement: An Empirical Assessment

The objective of this paper is an ex-post evaluation of the European Union–Southern African Development Community Economic Partnership Agreement (EU–SADC EPA) stemming from changes in trade flows from the six members of the SADC (Botswana, Eswatini, Lesotho, Mozambique, Namibia, and South Africa) to the European Union (EU). The analysis uses detailed import and tariff data at the Harmonized System 6-digit level (HS-6) and provides estimates of the changes in the intensive and extensive margins of trade resulting from tariff reductions, as a consequence of the EU–SADC EPA initiative. The impact on the intensity of trade is estimated using a Difference-in-Differences (DID) estimation, controlling for both country and product-level trade flows. The impact on the trade of new goods (the extensive margin) before and after the agreement is evaluated through a probit analysis. The results show that the EU–SADC EPA has a positive impact on the EU’s imports from the six members of the SADC, even if significant differences emerge among sectors and countries.

News tone, investor sentiment, and liquidity premium

Investor sentiment affects stock market liquidity by affecting noise trading and irrational market makers. Previous studies have focused on this effect with the time-series variation in sentiment and liquidity. This paper utilizes firm-specific news sentiment (FSNS) to examine its effect on stock liquidity in China stock market and show that firms with an optimistic tone cause a rise in trading activity while decreasing price impact and transaction cost. We also find that pessimistic stocks exhibit a stronger predictive effect on stock returns than optimistic stocks. After decomposing liquidity into non-sentiment-driven components, we find that the liquidity premium is declining but remains significant. This declining pattern indicates that FSNS contributes to explaining the liquidity premium. We also show that monetary policy uncertainty, growth of margin trading, and institutional ownership are the underlying mechanisms driving the predictability of stock liquidity.

The Impact of U.S. Trade Policy Uncertainty on the Trade Margins of China’s Export to the U.S.

Since the subprime crisis, the U.S. has begun to adjust its international trade policies due to the worldwide economic slowdown, leaving its trading partners facing great uncertainty in trade policy. In this study, we developed a panel model to empirically analyze the impact of U.S. trade policy uncertainty on the extensive margin, intensive margin, price margin, and quantity margin of Chinese exports of U.S. goods. We found that U.S. trade policy uncertainty is also a trade barrier for China’s export trade. The extensive margin, intensive margin, price margin, and quantity margin of Chinese exports to the U.S. are all adversely connected with U.S. trade policy uncertainty. The increase in U.S. trade policy uncertainty significantly inhibits the increase in the extensive margin, intensive margin, and quantity margin of China’s exports to America, and the degree of inhibition of the quantity margin is five times that of the extensive margin. Increased U.S. trade policy uncertainty also restrains the increase in the price margin of Chinese exports to America, but this is not statistically significant. In this study, we emphasize the significant impact that U.S. trade policy uncertainty has had on the trade margins of Chinese exports of goods to America. To stabilize China’s exports to the United States, China should increase support for export enterprises’ technological R&D and innovation, expand bilateral or multilateral free trade agreements with other countries, and so on.

The effectiveness of embargoes: Evidence from Russia

AbstractWhile sanctions have been an increasingly popular instrument of Western foreign policy over the past several decades, retaliatory measures by non‐Western targets of Western sanctions are a more recent development. In this study, I focus on the first such incident in recent history: the Russian retaliatory embargo imposed in August 2014 in response to the anti‐Russian sanctions that have been in place since March 2014. I formulate a comprehensive approach to analysing the impacts of such retaliations on trade and how retaliating countries deal with lost trade. Towards that goal, I use a quadruple difference approach with high‐dimensional fixed effects to disentangle various effects of the retaliatory embargo on the extensive and intensive margins of trade. I find that such retaliation comes at a cost to both the retaliating country and the target of retaliation, while not being effective as Russian sanctions are still in place today. I estimate that the total loss of trade from such retaliation amounts to about 42 billion USD in the first 1.5 years after the imposition of the embargo. The disturbances caused by such retaliation destabilise bilateral trade by causing negative spillovers and significantly increase the costs of retaliation as an economic policy or political strategy. Note: This paper was written prior to the Russian invasion in Ukraine on 24 February 2022.

The impact of margin trading and short selling on the investment-to-price sensitivity. Evidence from China

Employing a database of seven successive short-selling and margin trading ban lifts in the Chinese stock markets during the period 2010–2020, I investigate the impact of leveraged trading transactions on the investment-to-price sensitivity. I also examine whether stock liquidity and institutional shareholdings affect the investment sensitivity subsequent to the lift of short-selling and margin trading constraints. The results from the panel data regression analysis show that lifting bans lead to less corporate investment and a decrease of the investment-to-price sensitivity between 0.29% and 0.44%. Moreover, the regression results reveal that the investment-to-price sensitivity is stronger for more liquid stocks, while the proportion of institutional shareholdings does not affect significantly the corporate investment sensitivity.

Who Is Successful in Foreign Exchange Margin Trading? New Survey Evidence from Japan

We use a 2018 survey of FX margin traders in Japan to investigate which key factors influence their trading performance: socio-demographic and economic situation, investment strategy and trading behaviour, and/or financial literacy. We study this question using general-to-specific modelling and impulse-indicator saturation. First, the data show that variables from all three groups are significant predictors of traders’ performance. Second, we find that older traders and those without a specific trading strategy demonstrate lower performance. Performance is higher for those who trade greater amounts, rely more on fundamental analysis, and report having profitable FX trade skills. Third, respondents’ subjectively stated claim of having FX trade skills is based on a more advanced understanding of FX trading and a reliance on professional advice. Neither objective financial knowledge nor over/underconfidence play a noteworthy role in the performance of margin traders.