Confirmation of T+35 Failures-To-Deliver Cycles: Evidence from GameStop Corp.
Albrecht, Peter; Drábek, Michal; Pastorek, Daniel
Year: 2023 Volume: 73 Issue: 1 Pages: 56-80
Abstract: In this paper, we examine the potential of cycles in the valuation of GameStop Corp. (GME) stocks, due to the unique exemptions in exchange traded fund (ETF) creation/redemption activities. In order to satisfy liquidity in the market, a market maker and/or authorised participant is allowed to sell ETF shares that have not yet been created. With the use of wavelet coherence, we find evidence that ETF Failures to Deliver (FTDs) formed consistent cycles in the day T+35 FTD clearing period. Results also confirm less consistent but repeating cycles between the T+3 and T+6 periods. To the best of our knowledge, we are the first in the literature to empirically examine the potential of these cycles and their co-movement between FTD and stock prices.
JEL classification: G10, G14, G40
Keywords: fails to deliver, gameStop, exchange-traded funds, wavelet coherence
DOI: https://doi.org/10.32065/CJEF.2023.01.03
RePEc: https://ideas.repec.org/a/fau/fauart/v73y2023i1p56-80.html
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