Securities Lending by Mutual Funds
46 Pages Posted: 12 May 2012
Date Written: February 6, 2011
Abstract
Using hand-collected data for 2000 to 2008, I examine securities lending by U.S. equity mutual funds. First, I study the decision to start lending. It tends to be a family decision driven by economies of scale and past performance. Within participating families, smaller funds and funds with larger pricing impact are less likely to start lending. Second, I find that smaller and underperforming funds tend to earn more from securities lending. I also find families with superior investment performance learn to improve their value added from lending. Finally, fund entry in stock lending is associated with changes in fund turnover.
Keywords: mutual funds, securities lending
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