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

Authors

Ken B. Cyree, University of Southern MississippiFollow
Drew B. Winters, University of Central FloridaFollow

Document Type

Article

Publication Date

10-1-2001

Department

Finance, Real Estate, and Business Law

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.

Comments

©Journal of Business

Publisher Version

Publication Title

Journal of Business

Volume

74

Issue

4

First Page

535

Last Page

556

Recommended Citation

Cyree, K. B., Winters, D. B. (2001). An Intraday Examination of the Federal Funds Market: Implications for the Theories of the Reverse-J Pattern. Journal of Business, 74(4), 535-556.
Available at: https://aquila.usm.edu/fac_pubs/3768