Analysis of federal funds rate changes and variance patterns

Ken B. Cyree, Drew B. Winters

Research output: Contribution to journalArticle

8 Scopus citations

Abstract

We analyze Fed funds rate changes in GARCH-in-mean (GARCH-M) models and find that daily rate change and variance patterns differ with the timing of the rate observation, but that all patterns are generally consistent with optimal reserve account management. We also find that Fed funds daily and intraday variances exhibit trends and persistence, and that daily variance effects differ when using marginal rates versus daily weighted average rates. Furthermore, we find that conditional variances do not provide information about daily or intraday rate changes. Our results provide support for the use of GARCH models for studies on other financial assets. JEL classification: G21, G28.

Original languageEnglish
Pages (from-to)403-418
Number of pages16
JournalJournal of Financial Research
Volume24
Issue number3
DOIs
StatePublished - Sep 2001

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