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- Title
100% MARGINS: COMBATING SPECULATION IN INDIVIDUAL SECURITY ISSUES.
- Authors
LARGAY III, JAMES A.
- Abstract
In recent years, the New York and American Stock Exchanges (NYSE and AMEX, respectively) have added a wrinkle of their own to the well established regulation of margin requirements on common stocks by the Federal Reserve System (FED) as a means of moderating fluctuations in stock prices. This new wrinkle involves imposition, by the respective exchanges, of special initial margin requirements (typically 100%) on individual security issues whose trading characteristics exhibit excessively speculative behavior. This paper reports the results of a study of the price and volume characteristics of a sample of 71 NYSE and 38 AMEX stocks placed under these special margin requirements during the 1968-1969 period. Specifically, we analyze the price change, price variability and trading volumes of these stocks around the times when 100% margins were imposed and, subsequently, when they were removed. The empirical results support the a priori hypothesis that banning the use of credit for transactions in individual issues is associated with a moderation or "cooling off" of speculative activity in these stocks.
- Subjects
UNITED States; MARGINS (Security trading); SPECULATION; STOCKS (Finance); MARGIN requirements; SECURITIES trading volume; STOCK exchanges; SECURITIES trading
- Publication
Journal of Finance (Wiley-Blackwell), 1973, Vol 28, Issue 4, p973
- ISSN
0022-1082
- Publication type
Article
- DOI
10.2307/2978347