"Marking-to-Market" and Treasury-Bill Futures Prices: Some Empirical Evidence

Seungmook Choi and Mel Jameson

The Financial Review, 2000, vol. 35, issue 1, 15-28

Abstract: Financial economists have not found empirical evidence of a "marking-to-market" effect in Treasury-bill futures contracts, despite a firm theoretical basis for its existence. Therefore, we speculate that confounding effects, possibly due to liquidity preferences, influence futures-forward price spreads. By using an empirical specification that allows for both effects, we present empirical evidence that Treasury-bill futures forward price spreads are sensitive to the volatility of the underlying commodity in ways predicted by the theory of the marking-to-market effect. Copyright 2000 by MIT Press.

Date: 2000
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