What is the maximum yield that can be received from owning an equity?

Suppose I lend you an equity security for ten years, interest-free, and you have to return it to me at the end of term (which means little-to-no risk-taking). What is the maximum (near-)riskless yield that can be "extracted" from holding the stock, in the absence of alpha? (I distinguish "yield" from "gains in the stock's value"; the latter of these doesn't count. Equivalently I'm asking about maximum yield above baseline equity returns.) Can this maximum be proven? The naive (obvious?) answer is "the best you can do is lend the stock" but I wonder if we can do better than this in general.

One strategy I thought of was to own the stock $$S$$, enter into an equity swap paying $$S$$ and receiving $$X$$ where $$X$$ is the inverse return of the stock with the highest borrow rate, buying $$X$$, and then lending it out. I know I must be missing something here (because short squeezes would be much rarer if one could synthetically lend in this way), but I'm not sure where I went wrong.

As far as proving an upper bound goes, I think maybe you could back out the monetizability of an equity by looking at the forward price and solving for $$q$$ in $$F=S_0\exp((r-q)t)$$, but this may not be practical since different market participants have different values for $$r$$.

• plus infinity!!! Sep 30, 2022 at 19:22
• @Valometrics.com Assuming efficient markets, how is this possible? I'd like to distinguish between fairly riskless yield-accumulating behavior (e.g. lending the stock) and bona fide systematic investment strategies (that require alpha). Sep 30, 2022 at 20:15