On the Effectiveness of the Federal Reserve's Margin Requirement

  • Author(s): DUDLEY G. LUCKETT
  • Published: Apr 30, 2012
  • Pages: 783-795
  • DOI: 10.1111/j.1540-6261.1982.tb02223.x


A portfolio‐theoretic model of the optimal margin account is developed. It is argued that the Federal Reserve's goal in setting the margin requirement is to influence investor equity ratios. Using the average equity ratio as the dependent variable and the arguments of the model as independent variables, an empirical model is estimated. It is concluded that the margin requirement is an effective regulatory tool.

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