Sources of Variation in Holding Returns for Fed Funds Futures Contracts

James Hamilton, Tatsuyoshi Okimoto

    Research output: Contribution to journalArticle

    Abstract

    This study relates predictable gains from positions in fed funds futures contracts to violations of the expectations hypothesis of the term structure of interest rates. Although evidence for predictable gains from positions in short-horizon contracts is mixed, we find that gains in longer horizon contracts can be well described using Markov-switching models, with predictability associated with particular episodes in which economic activity was weak and variability in the returns to these contracts was quite high.
    Original languageEnglish
    Pages (from-to)205-229
    JournalJournal of Futures Markets
    Volume31
    Issue number3
    DOIs
    Publication statusPublished - 2011

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