Intraday Predictability of Overnight Interest Rates
Lee (2001) found the overnight Eurodollar rate in London and the effective Fed funds rate exhibit similar calendar-day effects although the absolute magnitudes are less. Explanations for the smaller calendar-day effects on the overnight Eurodollar rate include the difference between market-specific conventions in the two markets and the time difference in measuring two interest rates. This paper investigates the relationship between the Fed funds rate at 11:30 am EST, the effective Fed funds rate and the overnight Eurodollar rate in London. It is found that the different calendar-day effects are caused by both the difference between market structures and by data collecting time difference.
|Date of creation:||29 Aug 2002|
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