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α: calibrated so average coauthorship-adjusted count equals average raw count
I test the Duffie, Gârleanu, and Pedersen hypothesis that security prices incorporate expected future securities lending income. To determine whether institutional investors anticipate gains from future lending of securities, I examine their trading behavior around loan-fee increases. The evidence suggests that institutions buy shares in response to an increase in lending fees, and that this could explain the premium associated with high-lending-fee stocks. Expected future lending income affects stock prices, although the effect seems to be attenuated by the negative information that arises from short selling.