Future Lending Income and Security Value
58 Pages Posted: 14 Jun 2010 Last revised: 23 Sep 2019
Date Written: June 1, 2013
Abstract
I test the Duffie, Gârleanu, and Pedersen (2002) hypothesis that security prices incorporate expected future securities lending income. To determine whether institutional investors anticipate gains from future lending of securities, I examine their trading behavior around loan fee increases. The evidence suggests that institutions buy shares in response to an increase in lending fees and that this could explain the premium associated with high lending fee stocks. Expected future lending income affects stock prices, although the effect seems to be attenuated by the negative information that arises from short selling.
Keywords: Security Lending Income, Institutional Investors
JEL Classification: G12, G14
Suggested Citation: Suggested Citation
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