Securities lending trends show merit of owning uncommon shares
10 August 2011 London
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US and European large caps with lower institutional ownership drop less in a crisis, according to Data Explorers (DX) analysis of securities lending activity last week.
“There is evidence within the large cap universe, that money was saved by owning shares that were slightly less popular with the traditional asset managers since they fell less far,” wrote DX in a research note.
As well, DX analysis shows that the scale of short selling is dwarfed by the supply of shares to short, by nine times – nowhere near the levels reached ahead of the credit crunch.
Still, a “small bit” of evidence shows that more shorted US stocks on the S&P500 tended to fall further in last week's sell-off.
In Europe, however, there was no pattern when comparing price changes with short interest for large caps on the Stoxx600.
“This further reinforces our argument that last week’s price drop had little do with short selling,” wrote DX.
“There is evidence within the large cap universe, that money was saved by owning shares that were slightly less popular with the traditional asset managers since they fell less far,” wrote DX in a research note.
As well, DX analysis shows that the scale of short selling is dwarfed by the supply of shares to short, by nine times – nowhere near the levels reached ahead of the credit crunch.
Still, a “small bit” of evidence shows that more shorted US stocks on the S&P500 tended to fall further in last week's sell-off.
In Europe, however, there was no pattern when comparing price changes with short interest for large caps on the Stoxx600.
“This further reinforces our argument that last week’s price drop had little do with short selling,” wrote DX.
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