TY - JOUR
T1 - The Micromechanics of the Federal Funds Market
T2 - Implications for Day-of-the-Week Effects in Funds Rate Variability
AU - Spindt, Paul A.
AU - Hoffmeister, J. Ronald
PY - 1988/12/1
Y1 - 1988/12/1
N2 - The federal funds rate arguably is the most important interest rate in the U.S. capital market because it plays a central role in monetary policy and the term structure. This paper examines the micromechanics of the funds market. We show that in a continuous market with asynchronous trading, regulatory constraints and accounting conventions that focus agents’ attention on discrete time instants have important implications for the dynamics of trading activity and realized market prices. We also exhibit a model of the market that explains observed regularities in the intertemporal behavior of the funds rate.
AB - The federal funds rate arguably is the most important interest rate in the U.S. capital market because it plays a central role in monetary policy and the term structure. This paper examines the micromechanics of the funds market. We show that in a continuous market with asynchronous trading, regulatory constraints and accounting conventions that focus agents’ attention on discrete time instants have important implications for the dynamics of trading activity and realized market prices. We also exhibit a model of the market that explains observed regularities in the intertemporal behavior of the funds rate.
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U2 - 10.2307/2331079
DO - 10.2307/2331079
M3 - Article
AN - SCOPUS:0001266729
VL - 23
SP - 401
EP - 416
JO - Journal of Financial and Quantitative Analysis
JF - Journal of Financial and Quantitative Analysis
SN - 0022-1090
IS - 4
ER -