Sources of Variation in Holding Returns for Fed Funds Futures Contracts

33 Pages Posted: 22 Mar 2015

See all articles by James D. Hamilton

James D. Hamilton

University of California at San Diego; National Bureau of Economic Research (NBER)

Tatsuyoshi Okimoto

Australian National University

Multiple version iconThere are 2 versions of this paper

Date Written: October 2009

Abstract

This paper relates predictable gains from positions in fed funds futures contracts to violations of the expectations hypothesis of the term structure of interest rates. Although evidence for predictable gains from positions in short-horizon contracts is mixed, we find that gains in longer-horizon contracts can be well described using Markov switching models, with predictability associated with particular episodes in which economic activity was weak and variability in the returns to these contracts was quite high.

Keywords: federal funds, futures, monetary policy, Markov switching

JEL Classification: E40, E50, G13

Suggested Citation

Hamilton, James D. and Okimoto, Tatsuyoshi, Sources of Variation in Holding Returns for Fed Funds Futures Contracts (October 2009). FRB Atlanta CQER Working Paper No. 09-03, Available at SSRN: https://ssrn.com/abstract=2583458 or http://dx.doi.org/10.2139/ssrn.2583458

James D. Hamilton (Contact Author)

University of California at San Diego ( email )

9500 Gilman Drive
Mail code: 0508
La Jolla, CA 92093-0508
United States
619-534-5986 (Phone)
619-534-7040 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Tatsuyoshi Okimoto

Australian National University ( email )

Canberra, Australian Capital Territory 2601
Australia

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
15
Abstract Views
297
PlumX Metrics