Future Lending Income and Security Value

58 Pages Posted: 14 Jun 2010 Last revised: 23 Sep 2019

See all articles by Melissa Porras Prado

Melissa Porras Prado

Nova School of Business and Economics; Centre for Economic Policy Research (CEPR)

Date Written: June 1, 2013


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

Porras Prado, Melissa, Future Lending Income and Security Value (June 1, 2013). Journal of Financial and Quantitative Analysis (JFQA), Vol. 50, No. 4, 2015, Available at SSRN: https://ssrn.com/abstract=1624777 or http://dx.doi.org/10.2139/ssrn.1624777

Melissa Porras Prado (Contact Author)

Nova School of Business and Economics ( email )

Campus de Carcavelos
Rua da Holanda 1
Carcavelos, 2775-405

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

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