An intraday examination of the federal funds market: Implications for the theories of the reverse-J pattern
Abbreviated Journal Title
CONDITIONAL HETEROSKEDASTICITY; NYSE STOCKS; RETURNS; VOLATILITY; VARIANCE; DYNAMICS; CLOSURES; MODEL; INDEX; Business
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.
Journal of Business
"An intraday examination of the federal funds market: Implications for the theories of the reverse-J pattern" (2001). Faculty Bibliography 2000s. 7953.