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Securities lending and information acquisition

Author

Listed:
  • Greppmair, Stefan
  • Jank, Stephan
  • Saffi, Pedro A. C.
  • Sturgess, Jason

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.

Suggested Citation

  • Greppmair, Stefan & Jank, Stephan & Saffi, Pedro A. C. & Sturgess, Jason, 2024. "Securities lending and information acquisition," Discussion Papers 08/2024, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdps:287759
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Equity lending markets; mutual funds; short sales; short interest; price revelation; public disclosure;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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