This paper examines the effects of margin requirements on the stock market volatility of
the Category A stock price index and Category B stock price index in the Taiwan Stock
Market. Although we find significant short-term relationships between margin changes and
volatility in a few cases, the empirical evidence presented in this paper is somewhat mixed.
However, some weak evidence indicates that margin changes Granger-cause volatility for
Category B stocks. The more speculative stocks are affected more by margin requirements.