Academic research, market liquidity, and the power of getting the facts right
03 February 2026
Buddhika Weerasena, director, equity analytic products at S&P Global Market Intelligence, reviews the significance of finding the facts through academic research and how this is supporting liquidity and resilience
Image: Shutterstock
Capital markets run on confidence, but they are held together by聽liquidity. The ability to transfer risk, express views, and execute trades without moving prices too far is what makes markets useful in the real economy. And while market commentary will always have its place, the day-to-day health of the system increasingly depends on a simpler discipline:聽analysing data, testing ideas, and finding facts.
That is where academic research comes in. When scholars can work with high-quality, real-world datasets, they do more than publish papers: they help the market understand itself. Their work can validate common beliefs, puncture myths, and most importantly provide聽evidence that informs opinions聽about how short selling, securities lending, and liquidity provision behave in practice.
Why academic work belongs in the market conversation
Academic research is built to be sceptical. It leans on transparent methods, robust testing, and peer review. That independence matters in finance, where narratives can travel faster than numbers, and where the same market event can be interpreted 10 different ways depending on incentives.
Partnerships between the industry and academia help close that gap. When researchers gain access to comprehensive securities finance information, they can test mechanisms that are otherwise hard to observe: where supply and demand meet in lending markets, how constraints develop, and what those dynamics mean for聽price discovery, market efficiency, and liquidity. The end result is not better marketing or better messaging, it is a healthier feedback loop:聽data ? analysis ? evidence ? better decisions.
A dataset built for real questions, not just theory
S&P Global Market Intelligence鈥檚 网爆吃瓜 Finance dataset has become a key input into this kind of work because it captures the real plumbing behind short selling and institutional lending activity. The coverage is broad tracking over聽US$50 trillion in global securities聽within the lending programmes of聽more than 20,000 institutional funds and deep, with a historical archive spanning聽more than 20 years聽and聽millions of intraday transactions.
Just as importantly, the dataset is sourced directly from market participants, prime brokers, custodians, asset managers, and hedge funds so researchers are not relying on proxies alone. That matters because in securities finance, small details (availability, rates, timing, utilisation) often determine whether a trade is possible, whether a short can be held, and whether liquidity can be provided when it is needed most.
What researchers actually do with securities finance data
The most useful academic work is rarely abstract. It tends to start with practical questions the market argues about every day then uses data to check what is true.
Short selling constraints and the supply of lendable shares聽is one major theme. Researchers examine when short sellers are effectively 鈥榬ationed鈥� by limited supply, high borrow costs, or operational frictions and what that means for pricing and liquidity. By linking lending supply and borrowing demand to real outcomes, this research helps clarify when short selling supports price discovery and when constraints may slow the flow of information into prices.
Another active area looks at聽short interest as information. Short interest is widely discussed, but academic work asks the tougher question: does it actually contain signals about future returns, risk, or market direction and under what conditions? Studies using global short interest often focus on measurement and validation, turning an indicator that can be anecdotal into something that can be tested across time, markets, and regimes.
A third strand digs into聽liquidity provision, crowding, and liquidity shocks. Here, researchers study whether concentrated short positions or rapid changes in borrow demand can amplify price moves when market depth thins out. The broader contribution is a reminder that liquidity is not only about the exchange order book, it is also shaped by financing markets, collateral dynamics, and the willingness (or ability) of lenders to keep inventory available.
There is also a growing body of work on聽ETFs and market plumbing. Researchers examine how ETF shorting connects to underlying equity liquidity, hedging activity, and (in some cases) the creation/redemption mechanism. Because ETFs are widely used as liquidity 鈥榳rappers鈥�, understanding their borrowing and shorting dynamics adds evidence to debates about when ETFs may help absorb shocks and when they may transmit them.
Finally, academic studies increasingly address聽corporate governance and voting. 网爆吃瓜 lending can interact with voting rights, recalls, and record dates, creating trade-offs between incremental lending revenue and stewardship objectives. Research in this area has helped move discussion away from hypotheticals and toward measurement: how common certain behaviours are, what conditions make them more likely, and what practices reduce governance risk without undermining market function.
Examples of academic work in action
A number of widely cited papers illustrate the range of questions researchers are tackling with securities finance data:
Short Selling Around News in International Stock Markets (Arseny Gorbenko), examines global sources of short sellers鈥� informational advantage by analysing their trading around public news releases in 38 countries. Shorts on negative news have stronger predictive power than non-news shorts, but only in countries with high-quality public information, more news per stock, and higher illiquidity.
How Constrained Are the Shorts? A First Look at Mutual Fund Position-Level 网爆吃瓜 Lending (Xi Dong, Qifei Zhu),聽explores how lending supply from mutual funds can shape short-selling activity, improving our understanding of constraints and their implications for market efficiency.
Short Interest and Aggregate Stock Returns: International Evidence (Arseny Gorbenko),聽investigates the relationship between aggregate short interest and stock returns across markets, helping quantify when and where shorting activity carries information.
Phantom of the Opera: ETF Shorting and Shareholder Voting (Richard B. Evans, O?uzhan Karaka?, Rabih Moussawi, Michael Young),聽examines how ETF shorting and securities lending can intersect with voting outcomes, linking market structure to governance.
Short Selling Equity Exchange Traded Funds and its Effect on Stock Market Liquidity (Egl? Karmazien?, Valeri Sokolovski),聽studies how ETF shorting relates to overall liquidity, adding evidence to debates about ETF-driven market quality.
Short Interest, Crowding and Liquidity Shocks (Hector Chan, Tony Tan),聽highlights how crowded positioning can interact with liquidity shocks, reinforcing why financing-market signals matter for stability.
The Role of Institutional Investors in Voting: Evidence from the 网爆吃瓜 Lending Market (Reena Aggarwal, Pedro A. C. Saffi, Jason Sturgess),聽uses lending-market behaviour to examine voting incentives and governance outcomes.
Taken together, these studies show the value of combining institutional-quality data with independent research design. They do not eliminate disagreement, finance will always have competing views, but they raise the standard of debate by making it harder to argue with measured reality.
The market benefit: better liquidity through better evidence
The practical payoff is straightforward. When academics can observe lending supply, borrow costs, utilisation, and the timing of changes in demand, they can test causal stories rather than rely on intuition. That improves how the market understands liquidity: what supports it, what drains it, and what signals stress before it shows up elsewhere.
In an environment where narratives can dominate and incentives can distort,聽finding facts is market infrastructure. Academic partnerships, grounded in robust data, help ensure that decisions and policies reflect how markets actually behave, especially under pressure. And that, in the end, is one of the quiet ways research supports the liquidity and resilience everyone relies on.
That is where academic research comes in. When scholars can work with high-quality, real-world datasets, they do more than publish papers: they help the market understand itself. Their work can validate common beliefs, puncture myths, and most importantly provide聽evidence that informs opinions聽about how short selling, securities lending, and liquidity provision behave in practice.
Why academic work belongs in the market conversation
Academic research is built to be sceptical. It leans on transparent methods, robust testing, and peer review. That independence matters in finance, where narratives can travel faster than numbers, and where the same market event can be interpreted 10 different ways depending on incentives.
Partnerships between the industry and academia help close that gap. When researchers gain access to comprehensive securities finance information, they can test mechanisms that are otherwise hard to observe: where supply and demand meet in lending markets, how constraints develop, and what those dynamics mean for聽price discovery, market efficiency, and liquidity. The end result is not better marketing or better messaging, it is a healthier feedback loop:聽data ? analysis ? evidence ? better decisions.
A dataset built for real questions, not just theory
S&P Global Market Intelligence鈥檚 网爆吃瓜 Finance dataset has become a key input into this kind of work because it captures the real plumbing behind short selling and institutional lending activity. The coverage is broad tracking over聽US$50 trillion in global securities聽within the lending programmes of聽more than 20,000 institutional funds and deep, with a historical archive spanning聽more than 20 years聽and聽millions of intraday transactions.
Just as importantly, the dataset is sourced directly from market participants, prime brokers, custodians, asset managers, and hedge funds so researchers are not relying on proxies alone. That matters because in securities finance, small details (availability, rates, timing, utilisation) often determine whether a trade is possible, whether a short can be held, and whether liquidity can be provided when it is needed most.
What researchers actually do with securities finance data
The most useful academic work is rarely abstract. It tends to start with practical questions the market argues about every day then uses data to check what is true.
Short selling constraints and the supply of lendable shares聽is one major theme. Researchers examine when short sellers are effectively 鈥榬ationed鈥� by limited supply, high borrow costs, or operational frictions and what that means for pricing and liquidity. By linking lending supply and borrowing demand to real outcomes, this research helps clarify when short selling supports price discovery and when constraints may slow the flow of information into prices.
Another active area looks at聽short interest as information. Short interest is widely discussed, but academic work asks the tougher question: does it actually contain signals about future returns, risk, or market direction and under what conditions? Studies using global short interest often focus on measurement and validation, turning an indicator that can be anecdotal into something that can be tested across time, markets, and regimes.
A third strand digs into聽liquidity provision, crowding, and liquidity shocks. Here, researchers study whether concentrated short positions or rapid changes in borrow demand can amplify price moves when market depth thins out. The broader contribution is a reminder that liquidity is not only about the exchange order book, it is also shaped by financing markets, collateral dynamics, and the willingness (or ability) of lenders to keep inventory available.
There is also a growing body of work on聽ETFs and market plumbing. Researchers examine how ETF shorting connects to underlying equity liquidity, hedging activity, and (in some cases) the creation/redemption mechanism. Because ETFs are widely used as liquidity 鈥榳rappers鈥�, understanding their borrowing and shorting dynamics adds evidence to debates about when ETFs may help absorb shocks and when they may transmit them.
Finally, academic studies increasingly address聽corporate governance and voting. 网爆吃瓜 lending can interact with voting rights, recalls, and record dates, creating trade-offs between incremental lending revenue and stewardship objectives. Research in this area has helped move discussion away from hypotheticals and toward measurement: how common certain behaviours are, what conditions make them more likely, and what practices reduce governance risk without undermining market function.
Examples of academic work in action
A number of widely cited papers illustrate the range of questions researchers are tackling with securities finance data:
Short Selling Around News in International Stock Markets (Arseny Gorbenko), examines global sources of short sellers鈥� informational advantage by analysing their trading around public news releases in 38 countries. Shorts on negative news have stronger predictive power than non-news shorts, but only in countries with high-quality public information, more news per stock, and higher illiquidity.
How Constrained Are the Shorts? A First Look at Mutual Fund Position-Level 网爆吃瓜 Lending (Xi Dong, Qifei Zhu),聽explores how lending supply from mutual funds can shape short-selling activity, improving our understanding of constraints and their implications for market efficiency.
Short Interest and Aggregate Stock Returns: International Evidence (Arseny Gorbenko),聽investigates the relationship between aggregate short interest and stock returns across markets, helping quantify when and where shorting activity carries information.
Phantom of the Opera: ETF Shorting and Shareholder Voting (Richard B. Evans, O?uzhan Karaka?, Rabih Moussawi, Michael Young),聽examines how ETF shorting and securities lending can intersect with voting outcomes, linking market structure to governance.
Short Selling Equity Exchange Traded Funds and its Effect on Stock Market Liquidity (Egl? Karmazien?, Valeri Sokolovski),聽studies how ETF shorting relates to overall liquidity, adding evidence to debates about ETF-driven market quality.
Short Interest, Crowding and Liquidity Shocks (Hector Chan, Tony Tan),聽highlights how crowded positioning can interact with liquidity shocks, reinforcing why financing-market signals matter for stability.
The Role of Institutional Investors in Voting: Evidence from the 网爆吃瓜 Lending Market (Reena Aggarwal, Pedro A. C. Saffi, Jason Sturgess),聽uses lending-market behaviour to examine voting incentives and governance outcomes.
Taken together, these studies show the value of combining institutional-quality data with independent research design. They do not eliminate disagreement, finance will always have competing views, but they raise the standard of debate by making it harder to argue with measured reality.
The market benefit: better liquidity through better evidence
The practical payoff is straightforward. When academics can observe lending supply, borrow costs, utilisation, and the timing of changes in demand, they can test causal stories rather than rely on intuition. That improves how the market understands liquidity: what supports it, what drains it, and what signals stress before it shows up elsewhere.
In an environment where narratives can dominate and incentives can distort,聽finding facts is market infrastructure. Academic partnerships, grounded in robust data, help ensure that decisions and policies reflect how markets actually behave, especially under pressure. And that, in the end, is one of the quiet ways research supports the liquidity and resilience everyone relies on.
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