ANALYSIS OF FEDERAL FUNDS RATE CHANGES AND VARIANCE PATTERNS | Zendy

Cyree Ken B. | Zendy; Winters Drew B. | Zendy

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ANALYSIS OF FEDERAL FUNDS RATE CHANGES AND VARIANCE PATTERNS

Author(s) -

Cyree Ken B.,

Winters Drew B.

Publication year - 2001

Publication title -

journal of financial research

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.319

H-Index - 49

eISSN - 1475-6803

pISSN - 0270-2592

DOI - 10.1111/j.1475-6803.2001.tb00777.x

Subject(s) - autoregressive conditional heteroskedasticity , variance (accounting) , econometrics , conditional variance , federal funds , economics , statistics , mathematics , monetary economics , monetary policy , volatility (finance) , accounting

We analyze Fed funds rate changes in GARCH‐in‐mean (GARCH‐M) models and find that daily rate change and variance patterns differ with the timing of the rate observation, but that all patterns are generally consistent with optimal reserve account management. We also find that Fed funds daily and intraday variances exhibit trends and persistence, and that daily variance effects differ when using marginal rates versus daily weighted average rates. Furthermore, we find that conditional variances do not provide information about daily or intraday rate changes. Our results provide support for the use of GARCH models for studies on other financial assets. JEL classification: G21, G28

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