Economics, Econometrics and Finance
4 years ago

Margin purchases inflate market prices, impacting asset market performance.

Journal of Economic Behavior & Organization
Testing market regulations in experimental asset markets – The case of margin purchases
Sascha Füllbrunn, Tibor Neugebauer

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Margin requirements in financial markets help control risks of leveraged positions. A study tested how margin regulations, like margin purchases, affect market performance. Results show that allowing margin purchases raises market prices. Additionally, permitting short sales helps counteract the impact of margin purchases.