Borrowing Fees and Expected Stock Returns

22 Pages Posted: 11 Nov 2020

See all articles by Kaitlin Hendrix

Kaitlin Hendrix

Dimensional Fund Advisors

Gavin Crabb

Dimensional Fund Advisors

Date Written: November 6, 2020

Abstract

Borrowing fees set in the securities lending market contain reliable information about the cross section of short-term expected stock returns. Using securities lending data for 14 developed and emerging markets from 2011 to 2018, we find that stocks with high borrowing fees tend to underperform their peers over the short term. Moreover, stocks that remain expensive to borrow continue to underperform, but persistence of high borrowing fees is not systematically predictable. While the information in borrowing fees is fast decaying, it can still be efficiently incorporated into real-world equity portfolios.

Keywords: securities lending, short selling, short interest, expected return, rebate rates

JEL Classification: G12, G14, G15

Suggested Citation

Hendrix, Kaitlin and Crabb, Gavin, Borrowing Fees and Expected Stock Returns (November 6, 2020). Available at SSRN: https://ssrn.com/abstract=3726227 or http://dx.doi.org/10.2139/ssrn.3726227

Kaitlin Hendrix (Contact Author)

Dimensional Fund Advisors ( email )

6300 Bee Cave Road, Building One
Austin, TX 78746
United States

Gavin Crabb

Dimensional Fund Advisors ( email )

6300 Bee Cave Road, Building One
Austin, TX 78746
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
173
Abstract Views
701
rank
198,776
PlumX Metrics