Should retail investors' leverage be limited?

• 成果类型: Article
• 署名作者: Heimer, Rawley; Simsek, Alp
• 署名单位: Boston College; Massachusetts Institute of Technology (MIT); National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2018.10.017
• 发表日期: 2019
• 页码: 1-21
• 关键词: Leverage restriction policy; foreign exchange market; Retail trading; speculation; Consumer financial protection

摘要

Does the provision of leverage to retail traders improve market quality or facilitate socially inefficient speculation that enriches financial intermediaries? We evaluate the effects of 2010 regulations that cap leverage in the U.S. retail foreign exchange market. Using three unique data sets and a difference-in-differences approach, we document that the leverage-constraint reduces trading volume by 23%, alleviates high-leverage traders' losses by 40%, and reduces brokerages' operating capital by 25%. Yet, the policy does not affect the relative bid-ask prices charged by the brokerages. These results suggest the policy improves belief-neutral social welfare without reducing market liquidity. (C) 2018 Elsevier B.V. All rights reserved.