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- Title
Regulating Access to International Large-Value Payment Systems.
- Authors
Holthausen, Cornelia; Rønde, Thomas
- Abstract
Higher initial margin requirements are associated with lower subsequent stock market volatility during normal and bull periods, but show no relationship during bear periods. Higher margins are also negatively related to the conditional mean of stock returns, apparently because they reduce systemic risk. We conclude that a prudential rule for setting margins (or other regulatory restrictions) is to lower them in sharply declining markets in order to enhance liquidity and avoid a depyramiding effect in stock prices, but subsequently raise them and keep them at the higher level in order to prevent a future pyramiding effect.
- Subjects
MARGINS (Security trading); MARGIN requirements; PAYMENT systems; MARKET volatility; LIQUIDITY (Economics); STOCK prices
- Publication
Review of Financial Studies, 2002, Vol 15, Issue 5, p1561
- ISSN
0893-9454
- Publication type
Article
- DOI
10.1093/rfs/15.5.1561