The lease rate is an interest rate (ie, based on time) in addition to the absolute minimum payment of the dividends issued. It is set by the market: there is a limited supply of shares available to be borrowed for shorting. For most stocks it is about 0.3% for institutional investors, but 5% for a tenth of stocks. The point is that this is an asymmetry with buying a stock.
Now that I look it up and see that it is 0.3%, I admit that is not so big, but I think it is larger than the repo rate. I see no reason for the lease rate to be related to inflation, so in a high inflation environment, you could make money by shorting a stock that did not change nominal price.
(Dividends are not a big deal in shorting because the price of a stock usually drops by the amount of the dividend, for obvious reasons.)
The lease rate is an interest rate (ie, based on time) in addition to the absolute minimum payment of the dividends issued. It is set by the market: there is a limited supply of shares available to be borrowed for shorting. For most stocks it is about 0.3% for institutional investors, but 5% for a tenth of stocks. The point is that this is an asymmetry with buying a stock.
Now that I look it up and see that it is 0.3%, I admit that is not so big, but I think it is larger than the repo rate. I see no reason for the lease rate to be related to inflation, so in a high inflation environment, you could make money by shorting a stock that did not change nominal price.
(Dividends are not a big deal in shorting because the price of a stock usually drops by the amount of the dividend, for obvious reasons.)