The Indicator from Planet Money · Tuesday, August 11, 2026
A study examining margin trading in India found that it significantly amplifies market downturns. During a financial crisis, stocks bought on margin fell considerably more than those not bought on margin, as forced selling by investors to cover loans exacerbated losses.
“It's during those downswings that we get this amplification.”
“The margin basket of stocks went down significantly more than the basket of non margin stocks during the crisis. Many margin sellers were forced to sell their investments to cover loans. This forced selling amplified overall losses.”