58 Pages Posted: 7 Sep 2010
Date Written: September 2010
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: 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
By Eli Ofek