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

Ken B Cyree and Drew B Winters

The Journal of Business, 2001, vol. 74, issue 4, 535-56

Abstract: 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. Copyright 2001 by University of Chicago Press.

Date: 2001
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