Securities Lending and Information Funds that Lend a Stock are Better at Timing its Sale

Presented by Dr Pedro Saffi (Judge Business School)

Date: Tuesday 9 June 2020

Time: 14.30 BST

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Webinar Overview:

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.

Dr. Pedro Saffi is currently a Reader at the Judge Business (University of Cambridge, UK) and Director of the Master in Finance programme at the Judge Business School. He obtained his PhD in Finance from London Business School in 2007 and a MSc. in Economics from Fundação Getulio Vargas (2002) in Brazil.  Before Cambridge he was an Assistant Professor of Finance at IESE in Spain between 2007 and 2011. His research focus on topics such as security lending markets; short selling; and limits to arbitrage. He regularly presents his work in the top academic conferences and contributed with articles to the popular press. He has published his work in the top Finance journals in the world, like the Journal of Finance, the Review of Financial Studies, and the JFQA. In 2012 he was awarded one the Q Group’s research awards, in 2013 an award by Inquire Europe, in 2015 the NAC & Blackrock Global Challenge for Innovation in Corporate Governance prize, and one of the 2015 Crowell prizes given by PanAgora Asset Management.

Securities Lending and Information Funds that Lend a Stock are Better at Timing its Sale

Pedro Saffi


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