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The Effects of Stock Lending on Security Prices: An ExperimentSteven N. KaplanUniversity of Chicago - Booth School of Business; National Bureau of Economic Research (NBER) Tobias J. MoskowitzUniversity of Chicago - Booth School of Business Berk A. SensoyOhio 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 Accepted Paper SeriesDate posted: October 22, 2009 ; Last revised: April 30, 2013Suggested CitationContact Information
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