This paper reports aggregate statistics on securities lending activity based on a recently concluded pilot data collection by staff from the Office of Financial Research (OFR), the Federal Reserve System, and staff from the Securities and Exchange Commission (SEC). In its annual reports, the Financial Stability Oversight Council identified a lack of data about securities lending activity as a priority for the Council. This pilot data collection was a step toward addressing this critical data need. The voluntary pilot collection included end-of-day loan-level data for three non-consecutive business days from seven securities lending agents. Most but not all participating lending agents were subsidiaries of banks. The dataset of 75 reporting fields provides substantial new information about securities lending activity, including information concerning securities owners, securities borrowers, attributes of securities loans, collateral management, and cash reinvestment practices. However, the pilot data collection was limited in scope and duration. Comprehensive data are still lacking. To close this data gap, a permanent collection of data covering securities lending activity is recommended by the Council.

This paper examines the sources of cross-country comovement of momentum returns over the 1975–2004 period. Using data on more than 17,000 individual firms across 100 industries from 40 countries, we document the profitability of country-neutral individual firm, industry, and industry-adjusted return momentum. We show that country-neutral momentum returns are significantly correlated across countries, the correlation is time-varying, and that comovement among industries cannot explain the comovement of country-neutral momentum returns. However, we find that standard risk factor models do explain a significant portion of the cross-country comovement of momentum returns, even though they do not explain average momentum returns.

Momentum return investment strategies that diversify across countries provide lower portfolio standard deviations and/or increased expected returns. These diversification benefits are larger when adding emerging markets than when adding developed markets, and they are larger than would be suggested by diversifying with long-only portfolios. Using data on almost 16,000 firms from 22 developed and 18 emerging markets over the 1990–2004 period, we confirm the profitability of momentum trading strategies in both developed and emerging markets and document the diversification benefits of including emerging markets in an international momentum portfolio investment strategy.

We compare individual U.S. equity return data from Thomson Datastream (TDS) with similar data from the Center for Research in Security Prices (CRSP) to evaluate TDS for use in studies involving large numbers of individual equities in markets outside the United States. We document important issues of coverage, classification, and data integrity and find that naive use of TDS data can have a large impact on economic inferences. We show that after careful screening of the TDS data, inferences drawn from TDS data are similar to those drawn from CRSP. We illustrate the importance of the screens we develop using U.S. TDS data by applying the screens to TDS data from four European equity markets.

This paper examines the sources of cross-country comovement of momentum returns over the 1975-2002 period. Using data on more than 16,000 individual firms across 100 industries from 38 countries, we document the profitability of momentum trading strategies using individual firm returns, industry returns, and industry-adjusted returns. We show that country-neutral momentum returns are significantly correlated across countries and are time-varying. We find that although both across-industry and within-industry momentum is profitable in a large number of countries, comovement among industries cannot explain the comovement of country-neutral momentum returns. However, we find that standard risk factor models do explain a significant portion of the cross-country comovement of momentum returns, even though they do not explain average momentum returns.

Recent research has suggested that the state of market-wide liquidity varies over time and that the covariance of returns with innovations in a market-wide liquidity state variable is priced. However, liquidity has multiple dimensions which incorporate key elements of volume, time and transaction costs and it is not clear which of these are important to investors. This paper estimates measures of market-wide liquidity along multiple dimensions and finds that each measure's innovations are correlated, that covariance of stock returns and innovations in each measure is priced, and combining the information in each measure improves the precision of estimated liquidity risk premia. I estimate the liquidity risk premium to be approximately 2-6% per year.

Better proxies for the information about future returns contained in firm characteristics such as size, book-to-market equity, cash flow-to-price, percent change in employees, and various past return measures are obtained by breaking these explanatory variables into two industry-related components. The components represent (1) the difference between firms' own characteristics and the average characteristics of their industries (within-industry variables), and (2) the average characteristics of firms' industries (across-industry variables). Each variable is reliably priced within-industry and measuring the variables within-industry produces more precise estimates than measuring the variables in their more common form. Contrary to Moskowitz and Grinblatt [1999], we find that within-industry momentum (i.e., the firm's past return less the industry average return) has predictive power for the firm's stock return beyond that captured by across-industry momentum. We also document a significant short-term (one-month) industry momentum effect which remains strongly significant when we restrict the sample to only the most liquid firms.