An empirical analysis of margin debt

Despite the extensive literature on margin requirements and stock market volatility, few articles consider the determinants of margin borrowing. Our trivariate autoregressive model of margin debt, stock returns, and the broker call rate shows that margin debt responds positively to stock returns and negatively to interest rate changes over the period 1951-2001. We also document an asymmetry, with margin debt responding quickly to stock market downturns and more gradually to market upswings.