Conference Agenda

Using stock-level data from the securities lending market, we investigate how financial markets process information. Our key empirical innovation is to use demand increases in the securities lending market to pin down the arrival of information. A premise that we motivate theoretically and validate empirically using state-of-the-art metrics for informed trading. We find that, when a stock experiences an increase in its shorting demand, the return volatility and its correlation with trading volume increase while the price informativeness decreases. These findings align with a differences-of-opinion model where overconfident investors trade so aggressively on their perceived increases in information that prices reveal less about fundamentals. Our results remain after excluding public announcements, highlighting the securities lending market’s role in private information.

This article evaluates the impact of the European Central Bank's (ECB) third covered bond purchase program (CBPP3) on yields, issuance and portfolio positions using a matched difference-in-difference estimation. The CBPP3 is estimated to reduce yields for euro area issuers, relative to non-euro area issuers. In contrast, it appears to have stimulated issuance in both regions. From a demand-side perspective, bank investors exhibit the least elastic demand; an increase in their ex-ante investor share is associated with greater yield and issuance impact. Euro area banks buy and hold covered bonds relatively inelastically, as they can pledge them as collateral in ECB repos to obtain cash.