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Economic Perspectives, Vol. 25, 3rd, No. 3, August 2001
Stock margins and the conditional probability of price reversals
The debate over the need for regulated stock margins is an old one. The argument that "low margins make speculation cheap" persuades some observers that low margin requirements lead to greater stock price volatility. One rebuttal to this argument is that low margins encourage greater stock market participation and that greater diversity of expectations actually lessens volatility.
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