Active Institutional Investors and Short Sale Constraints around the Global Financial Crisis

44 Pages Posted: 19 Jul 2014 Last revised: 19 Dec 2016

See all articles by Zsuzsa R. Huszar

Zsuzsa R. Huszar

National University of Singapore ; Central European University

R.S.K. Tan

National University of Singapore

Weina Zhang

Department of Finance, National University of Singapore; National University of Singapore Risk Management Institute

Date Written: October 3, 2015

Abstract

In a sample of U.S. stocks, higher stock lending fees predict significantly lower excess returns beyond shorting demand and loan supply. This relation is stronger after October 2008 which is likely attributable to a regime shift in the lending market with the onset of the Global Financial Crisis. We show that active institutional lenders not only respond to demand but also price in private information around earnings news announcements. As lenders raise fees before negative announcement in expectation of higher future shorting demand, they likely create more binding short-sale constraints when short selling could be essential for price discovery.

Keywords: Institutional ownership, Securities lending market, Short sales, Short sale constraints

JEL Classification: G10, G12, G14

Suggested Citation

Huszar, Zsuzsa R. and Tan, Ruth Seow Kuan and Zhang, Weina, Active Institutional Investors and Short Sale Constraints around the Global Financial Crisis (October 3, 2015). Available at SSRN: https://ssrn.com/abstract=2468052 or http://dx.doi.org/10.2139/ssrn.2468052

Zsuzsa R. Huszar (Contact Author)

National University of Singapore ( email )

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Central European University ( email )

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Ruth Seow Kuan Tan

National University of Singapore ( email )

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Weina Zhang

Department of Finance, National University of Singapore ( email )

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HOME PAGE: http://bizfaculty.nus.edu/faculty-profiles/108-weina

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