@article{520998f77d0d46fea04ee2f1020e7923,
title = "Margin regulation and volatility",
abstract = "An infinite-horizon asset-pricing model with heterogeneous agents and collateral constraints can explain why adjustments in stock market margins under US Regulation T had an economically insignificant impact on market volatility. In the model, raising the margin requirement for one asset class may barely affect its volatility if investors have access to another, unregulated class of collateralizable assets. Through spillovers, however, the volatility of the other asset class may substantially decrease. A very strong dampening effect on all assets' return volatilities can be achieved by a countercyclical regulation of all markets.",
keywords = "Collateral constraints, General equilibrium, Heterogeneous agents, Margin requirements, Regulation T",
author = "Johannes Brumm and Michael Grill and Felix Kubler and Schmedders, {Karl H}",
note = "Funding Information: The authors thank Antoine Camous, Chris Carroll, Lars Hansen, Ken Judd, Nobuhiro Kiyotaki, Blake LeBaron, Jianjun Miao, Andrea Vedolin and participants at various conferences for helpful discussions on the subject. The authors are indebted to the Co-Editor Urban Jermann and an anonymous referee for detailed reviews that helped to improve the paper substantially. The authors thank Dave Brooks for numerous editorial comments. Felix Kubler and Karl Schmedders gratefully acknowledge the financial support of Swiss Finance Institute and the NCCR–FINRISK. Johannes Brumm and Felix Kubler acknowledge the support of the ERC. The opinions expressed in this paper are those of the authors and should not be regarded as those of the European Central Bank or the Eurosystem. Publisher Copyright: {\textcopyright} 2015 Elsevier B.V.",
year = "2015",
month = oct,
doi = "10.1016/j.jmoneco.2014.12.007",
language = "English (US)",
volume = "75",
pages = "54--68",
journal = "Journal of Monetary Economics",
issn = "0304-3932",
publisher = "Elsevier B.V.",
}