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The Effects of Stock Lending on Security Prices: An Experiment


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  • Steven N. Kaplan
  • Tobias J. Moskowitz
  • Berk A. Sensoy


Working with a sizeable, anonymous money manager, we randomly make available for lending two-thirds of the high-loan fee stocks in the manager’s portfolio and withhold the other third to produce an exogenous shock to loan supply. We implement the lending experiment in two independent phases: the first, from September 5 to 18, 2008, with over $580 million of securities lent; and the second, from June 5 to September 30, 2009, with over $250 million of securities lent. The supply shocks are sizeable and significantly reduce lending fees, but returns, volatility, skewness, and bid-ask spreads remain unaffected. Results are consistent across both phases of the experiment and indicate no adverse effects from securities lending on stock prices.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16335.

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Date of creation: Sep 2010
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Publication status: published as “The Effects of Stock Lending on Security Prices: An Experiment” with Tobias Moskowitz and Berk Sensoy, Journal of Finance, forthcoming.
Handle: RePEc:nbr:nberwo:16335

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Cited by:
  1. Khanna, Naveen & Mathews, Richmond D., 2012. "Doing battle with short sellers: The conflicted role of blockholders in bear raids," Journal of Financial Economics, Elsevier, Elsevier, vol. 106(2), pages 229-246.


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