BUFFALO, N.Y. – Contrary to widespread media reports, the collapse of several financial firms during the 2008 economic crisis was not triggered by unsettled stock trades, according to new research from the University at Buffalo School of Management.
The study, forthcoming in the Journal of Financial Economics, analyzed the open interest of fails-to-deliver — stock trades in which shares are not delivered within the three-day trading cycle — in the days before and after the stock crashes of American Insurance Group, Bear Stearns, Lehman Brothers and Merrill Lynch.