Fund Performance and Equity Lending: Why Lend What You Can Sell?
Review of Finance (2017) V21 (3), 1093-1121
52 Pages Posted: 6 Jul 2012 Last revised: 7 Jun 2017
Date Written: February 1, 2016
Abstract
The dramatic increase in the percentage of mutual funds lending equities suggests that lending fees are an increasingly important source of income for investment advisors. We find that funds that lend equities underperform otherwise similar funds in spite of lending income. The effect of lending is concentrated in funds that cannot act on the short-selling signal due investment restrictions set by the fund family to diversify their fund offerings across styles. Our findings suggest that the family organization explains why fund managers lend, rather than sell, stocks with short selling demand.
Keywords: Mutual funds, Index funds, Performance, Security lending
JEL Classification: G12, G14, G15, G23
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Short Sale Constraints and Stock Returns
By Charles M. Jones and Owen A. Lamont
-
Short Sale Constraints and Stock Returns
By Charles M. Jones and Owen A. Lamont
-
Breadth of Ownership and Stock Returns
By Joseph Chen, Harrison G. Hong, ...
-
Breadth of Ownership and Stock Returns
By Joseph Chen, Harrison G. Hong, ...
-
Can the Market Add and Subtract? Mispricing in Tech Stock Carve-Outs
By Owen A. Lamont and Richard H. Thaler
-
Can the Market Add and Subtract? Mispricing in Tech Stock Carve-Outs
By Owen A. Lamont and Richard H. Thaler
-
Limited Arbitrage in Equity Markets
By Mark L. Mitchell, Todd C. Pulvino, ...
-
Dotcom Mania: The Rise and Fall of Internet Stock Prices
By Eli Ofek and Matthew P. Richardson
-
Dotcom Mania: The Rise and Fall of Internet Stock Prices
By Eli Ofek
-
Dotcom Mania: The Rise and Fall of Internet Stock Prices
By Eli Ofek and Matthew P. Richardson