Abstract

http://ssrn.com/abstract=1492278
 
 

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The Effects of Stock Lending on Security Prices: An Experiment


Steven N. Kaplan


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Tobias J. Moskowitz


University of Chicago - Booth School of Business

Berk A. Sensoy


Ohio State University - Fisher College of Business

August 24, 2012

Journal of Finance, Forthcoming
Chicago Booth Research Paper No. 09-39
Chicago Booth Initiative on Global Markets Working Paper No. 42
Fisher College of Business Working Paper No. 2009-03-020
Charles A. Dice Center Working Paper No. 2009-20
AFA 2011 Meetings Paper

Abstract:     
We examine the impact of short selling by conducting a randomized stock lending experiment. Working with a large, anonymous money manager, we create an exogenous and sizeable shock to the supply of lendable shares by taking high-loan fee stocks in the manager’s portfolio and randomly making available and withholding stocks from the lending market. The experiment ran in two independent phases: the first, from September 5 to 18, 2008, with over $580 million of securities lent; and the second, from June 5 to September 30, 2009, with over $250 million of securities lent. While the supply shocks significantly reduce market lending fees and raise quantities, we find no evidence that returns, volatility, skewness, or bid-ask spreads are affected. The results provide novel evidence on the impact of shorting supply and do not indicate any adverse effects on stock prices from securities lending.

Number of Pages in PDF File: 73

Keywords: Short Selling, Securities Lending, Stock Prices

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Date posted: October 22, 2009 ; Last revised: April 30, 2013

Suggested Citation

Kaplan, Steven N. and Moskowitz, Tobias J. and Sensoy, Berk A., The Effects of Stock Lending on Security Prices: An Experiment (August 24, 2012). Journal of Finance, Forthcoming; Chicago Booth Research Paper No. 09-39; Chicago Booth Initiative on Global Markets Working Paper No. 42; Fisher College of Business Working Paper No. 2009-03-020; Charles A. Dice Center Working Paper No. 2009-20; AFA 2011 Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1492278 or http://dx.doi.org/10.2139/ssrn.1492278

Contact Information

Steven Neil Kaplan (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-4513 (Phone)
773-702-0458 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Tobias J. Moskowitz
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-2757 (Phone)
773-702-0458 (Fax)
Berk A. Sensoy
Ohio State University - Fisher College of Business ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States

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References:  39
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