An Intraday Examination of the Federal Funds Market: Implications for the Theories of the Reverse-J Pattern

Posted: 6 Sep 2001

See all articles by Ken B. Cyree

Ken B. Cyree

University of Mississippi - School of Business Administration

Drew B. Winters

Texas Tech University

Abstract

The intraday literature suggests that returns, variances, and volume form an intraday reverse-J pattern. Two competing theories explain the observed patterns: private information about future security prices and trading stoppages. The federal funds market allows a unique opportunity to study the causes of intraday patterns because private information common to most markets does not play a role in setting prices. We find reverse-J variance patterns while accounting for generalized autoregressive conditional heteroskedasticity (GARCH) model effects. Our results support trading stops as an explanation for the reverse-J pattern and suggest that private information is not a necessary condition for the observed pattern.

Suggested Citation

Cyree, Ken B. and Winters, Drew B., An Intraday Examination of the Federal Funds Market: Implications for the Theories of the Reverse-J Pattern. Available at SSRN: https://ssrn.com/abstract=279470

Ken B. Cyree

University of Mississippi - School of Business Administration ( email )

PO Box 3986
Oxford, MS 38677
United States

Drew B. Winters (Contact Author)

Texas Tech University ( email )

Finance Department
Rawls College of Business
Lubbock, TX 79409
United States
806-742-3350 (Phone)
806-742-3197 (Fax)

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