To what extent do mutual funds benefit from securities lending ? On June 9th Inquire UK will host Pedro Saffi for a webinar on how acquiring information from the lending market can be advantageous.
Join us on Tuesday, June 9th at 14:30, where we will be hearing from Pedro Saffi rom Judge Business School on Securities Lending and Information
Date: Tuesday, June 9th Time: 14:30
Title: Securities Lending and Information: Funds That Lend A Stock Are Better At Timing Its Sale
Speaker: Dr. Pedro Saffi, Judge Business School
We show that mutual funds use information acquired by participating in the equity lending market to make portfolio allocation decisions. Using data from German mutual funds on their stock-level lending decisions, we find that funds lending shares are more likely to exit positions relative both to stocks that they do not lend and to funds that do not lend. Lenders also avoid losses by better timing the closure of long positions than for stocks they do not lend. Finally, we show information acquisition in the lending market allows lenders to front-run public disclosure of large short positions. The results suggest that the securities lending market provides a mechanism for mutual funds to acquire information.
You can also have a look at the paper. This is the link to the paper.