Intraday Predictability of Overnight Interest Rates

Young-Sook Lee
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Young-Sook Lee: University of Nottingham

No 122, Royal Economic Society Annual Conference 2002 from Royal Economic Society

Abstract: Lee (2001) found the overnight Eurodollar rate in London and the effective Fed funds rate exhibit similar calendar-day effects although the absolute magnitudes are less. Explanations for the smaller calendar-day effects on the overnight Eurodollar rate include the difference between market-specific conventions in the two markets and the time difference in measuring two interest rates. This paper investigates the relationship between the Fed funds rate at 11:30 am EST, the effective Fed funds rate and the overnight Eurodollar rate in London. It is found that the different calendar-day effects are caused by both the difference between market structures and by data collecting time difference.

Date: 2002-08-29
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