PT - JOURNAL ARTICLE AU - Lee M. Dunham AU - Thuy H. Simpson TI - The Impact of Securities Lending on Index Fund Performance AID - 10.3905/joi.2012.21.2.009 DP - 2012 May 31 TA - The Journal of Investing PG - 9--16 VI - 21 IP - 2 4099 - https://pm-research.com/content/21/2/9.short 4100 - https://pm-research.com/content/21/2/9.full AB - Managers of index funds face competitive pressures to replicate their respective benchmarks as close as possible or risk the loss of investors to competing index funds. As a result, these managers have incentive to take actions to reduce any tracking error. One particular way index funds reduce tracking error is through securities lending activities. The authors examine the impact of securities lending activities on the return performance of index funds and document that reliance on securities lending activity as a means of reducing tracking error has increased significantly over time.TOPICS: Passive strategies, mutual fund performance