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Shadow Financing Accelerated China Stock Market Crash of 2015

  • Research finds clues of "fire sales" by overleveraged punters
  • NBER paper tracked hundreds of thousands of margin accounts

Forced selling by leveraged investors flush with so-called shadow financing was responsible for accelerating China’s stock market crash three years ago, according to new academic research.

In failing to restrain financial innovations that allowed leverage to explode, China repeated a phenomenon with precedents dating to the Wall Street crash of 1929, researchers including Kelly Shue from the Yale School of Management and Jiangze Bian of Beijing’s University of International Business and Economics, wrote in a paper.