The Effects of Stock Lending on Security Prices: an Experiment

58 Pages Posted: 7 Sep 2010  

Steven N. Kaplan

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

Tobias J. Moskowitz

Yale University, Yale SOM; AQR Capital; National Bureau of Economic Research (NBER)

Berk A. Sensoy

Ohio State University - Fisher College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: September 2010

Abstract

Working with a sizeable, anonymous money manager, we randomly make available for lending two-thirds of the high-loan fee stocks in the manager's portfolio and withhold the other third to produce an exogenous shock to loan supply. We implement the lending experiment 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. The supply shocks are sizeable and significantly reduce lending fees, but returns, volatility, skewness, and bid-ask spreads remain unaffected. Results are consistent across both phases of the experiment and indicate no adverse effects from securities lending on stock prices.

Suggested Citation

Kaplan, Steven N. and Moskowitz, Tobias J. and Sensoy, Berk A., The Effects of Stock Lending on Security Prices: an Experiment (September 2010). NBER Working Paper No. w16335. Available at SSRN: https://ssrn.com/abstract=1672587

Steven Neil Kaplan (Contact Author)

University of Chicago - Booth School of Business ( email )

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National Bureau of Economic Research (NBER)

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Tobias J. Moskowitz

Yale University, Yale SOM ( email )

New Haven, CT 06520
United States

HOME PAGE: http://som.yale.edu/tobias-j-moskowitz

AQR Capital ( email )

Greenwich, CT
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Berk A. Sensoy

Ohio State University - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

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