Arbeitspapier

The federal funds market and the overnight Eurodollar market

Overnight Federal funds and overnight Eurodollars are among the most liquid short-term assets that a bank can hold to acquire required reserves. They are traded overnight and denominated in U.S. dollars. They also have different characteristics: The Fed funds market and the Eurodollar market are located in different places, and the transaction volume is larger in the overnight Eurodollar market than in the Fed funds market. This paper is an empirical work on the relationship between the Federal funds rate and the overnight Eurodollar rate. Hamilton (1996) found that the Fed funds rate exhibited calendar day effects over 1984-1990. I find that the overnight Eurodollar rate exhibits very similar calendar day effects but the absolute magnitudes are slightly less in general over 1984-1997. The empirical results support the hypothesis that the tendency in daily changes in the Federal funds rate and in the overnight Eurodollar rate are caused by line limits, transaction costs and accounting convention in the Federal funds market. The differential between the Fed funds rate and the overnight Eurodollar rate is predictable and it possibly provides the evidence against the efficient market hypothesis.

Sprache
Englisch

Erschienen in
Series: Research Notes ; No. 99-2

Klassifikation
Wirtschaft
Thema
Interest Rate Differential
Transaction Costs
Efficient Market Hypothesis
Calendar Effects
Zinsdifferenz
Geldmarkt
Euromarkt
Effizienzmarktthese
Schätzung
USA
Saisonschwankung

Ereignis
Geistige Schöpfung
(wer)
Lee, Yungsook
Ereignis
Veröffentlichung
(wer)
Deutsche Bank Research
(wo)
Frankfurt a. M.
(wann)
1999

Handle
Letzte Aktualisierung
10.03.2025, 11:42 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Lee, Yungsook
  • Deutsche Bank Research

Entstanden

  • 1999

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