Securities Lending and Information Acquisition

49 Pages Posted: 8 Mar 2024

See all articles by Stefan Greppmair

Stefan Greppmair

Deutsche Bundesbank

Stephan Jank

Deutsche Bundesbank

Pedro Saffi

University of Cambridge - Judge Business School

Jason Sturgess

Queen Mary University of London

Multiple version iconThere are 2 versions of this paper

Date Written: March 5, 2024

Abstract

Using microdata on stock-level lending positions from German mutual funds, we show that active funds use the equity lending market to obtain information about short sale demand. Funds reduce long positions in response to these demand signals, which allows fund managers to front-run public disclosure of big short positions and avoid future losses. Fund managers exploit this information advantage across funds they manage, but do not share it within their fund family, consistent with short demand signals providing an information advantage. Our results suggest a new motive for securities lending and an information aggregation role for the equity lending market.

Keywords: Equity lending markets, mutual funds, short sales, short interest, price revelation, public disclosure.

JEL Classification: G10, G12, G14, G18

Suggested Citation

Greppmair, Stefan and Jank, Stephan and Saffi, Pedro A. C. and Sturgess, Jason, Securities Lending and Information Acquisition (March 5, 2024). Deutsche Bundesbank Discussion Paper No. 08/2024, Available at SSRN: https://ssrn.com/abstract=4752643 or http://dx.doi.org/10.2139/ssrn.4752643

Stefan Greppmair (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Stephan Jank

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Pedro A. C. Saffi

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

HOME PAGE: http://www.pedrosaffi.com

Jason Sturgess

Queen Mary University of London ( email )

Mile End Road
London, London E1 4NS
United Kingdom

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