We are grateful to Michael Bauer, Brent Bundick, Eric Swanson, and an anonymous referee for comments on an earlier draft. Okimoto thanks the JSPS Postdoctoral Fellowships for Research Abroad for financial support.
Sources of variation in holding returns for fed funds futures contracts†
Article first published online: 21 JUN 2010
© 2010 Wiley Periodicals, Inc.
Journal of Futures Markets
Volume 31, Issue 3, pages 205–229, March 2011
How to Cite
Hamilton, J. D. and Okimoto, T. (2011), Sources of variation in holding returns for fed funds futures contracts. J. Fut. Mark., 31: 205–229. doi: 10.1002/fut.20473
- Issue published online: 13 JAN 2011
- Article first published online: 21 JUN 2010
- Manuscript Accepted: MAY 2010
- Manuscript Received: AUG 2009
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. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark 31:205–229, 2011