NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Hao Zhou

PBC School of Finance, Tsinghua University
43 Chengfu Road, Haidian District
Beijing, 100083, P. R. China
Tel.: +86-10-62790655
E-mail´╝Üzhouh@pbcsf.tsinghua.edu.cn
www.pbcsf.tsinghua.edu.cn

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Institutional Affiliation: Tsinghua University

NBER Working Papers and Publications

September 2018Leverage-Induced Fire Sales and Stock Market Crashes
with Jiangze Bian, Zhiguo He, Kelly Shue: w25040
We provide direct evidence of leverage-induced fire sales contributing to a market crash using account-level trading data for brokerage- and shadow-financed margin accounts during the Chinese stock market crash of 2015. Margin investors heavily sell their holdings when their account-level leverage edges toward their maximum leverage limits, controlling for stock-date and account fixed effects. Stocks that are disproportionately held by accounts close to leverage limits experience high selling pressure and abnormal price declines which subsequently reverse. Unregulated shadow-financed margin accounts, facilitated by FinTech lending platforms, contributed more to the crash despite their smaller asset holdings relative to regulated brokerage accounts.
November 2011Comment on "Systemic Risks and the Macroeconomy"
in Quantifying Systemic Risk, Joseph G. Haubrich and Andrew W. Lo, editors
 
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