MARGIN REQUIREMENTS, VOLATILITY, AND MARKET INTEGRITY - WHAT HAVE WE LEARNED SINCE THE CRASH

This study assesses the state of the policy debate that surrounds the federal regulation of margin requirements. A review of the literature finds no undisputed evidence that supports the hypothesis that margin requirements can be used to control stock return volatility and corres pondingly little evidence that suggests that margin-related leverage i s an important underlying source of ''excess'' volatility. The evidenc e does not support the hypothesis that there is a stable inverse relat ionship between the level of Regulation T margin requirements and stoc k returns volatility nor does it support the hypothesis that the lever age advantage in equity derivative products is a source of additional returns volatility in the stock market.