An Experimental Study on the Effectiveness of the Short Sales Mechanism to Restrain Bubbles in Chinese stock market
Abstract
Since 2015, the implement of the Short Sales Mechanism in Chinese A-share market has experienced from administrative intervention bans to a restoration. The market’s attitude toward the current Short Sales Mechanism varies from person to person. Meanwhile, the role of the Short Sales Mechanism in the operation of Chinese stock market remains to be studied. Using the method of experimental economics, this paper established a stock transaction market and simulated stock transaction in the computerized experimental environment to analyzes the effectiveness of the Short Sales Mechanism to restrain bubble in Chinese stock market, and examines the effectiveness of curbing the stock market bubbles under different risks. The result showed that the Short Sales Mechanism can effectively restrain the formation of the stock assets price bubbles, and has a more pronounced effect on high-risk stock. Also, the Short Sales Mechanism can increase the liquidity of the market, which prevents the price deviates excessively.References
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