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

Citation data:

Journal of Business, Vol: 74, Issue: 4, Page: 535-556

Publication Year:
2001
Usage 32
Downloads 29
Abstract Views 3
Repository URL:
https://aquila.usm.edu/fac_pubs/3768
Author(s):
Cyree, Ken B.; Winters, Drew B.
Tags:
Business
article description
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.