Does the Lending Rate Impact ETF's Prices?
19 Pages Posted: 23 Apr 2012
Date Written: April, 23 2012
In this paper we developed an econometric model to empirically test the hard-to-borrow model of Avellaneda and Lipkin (2009) where asset prices jump as result of "buy-in" procedures. The model is estimated using an extent version of simulated maximum likelihood (SML) for a selected group of Leveraged ETF, mainly short LETFs, because these instruments have been sporadically hard-to-borrow and are liquids. In general we do not find enough statistical evidence supporting that hard-to-borrow effect impacts LETFs prices. On the other hand, we did find statistical evidence supporting the jump-diffusion model for some Leveraged ETFs.
Keywords: Hard-to-borrow, Short-selling
JEL Classification: G12, G14, G17
Suggested Citation: Suggested Citation