The Micromechanics of the Federal Funds Market: Implications for Day-of-the-Week Effects in Funds Rate Variability

Paul A. Spindt, J. Ronald Hoffmeister

Research output: Contribution to journalArticle

58 Scopus citations

Abstract

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.

Original languageEnglish (US)
Pages (from-to)401-416
Number of pages16
JournalJournal of Financial and Quantitative Analysis
Volume23
Issue number4
DOIs
StatePublished - Dec 1 1988
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Fingerprint Dive into the research topics of 'The Micromechanics of the Federal Funds Market: Implications for Day-of-the-Week Effects in Funds Rate Variability'. Together they form a unique fingerprint.

  • Cite this