Sources of Variation in Holding Returns for Fed Funds Futures Contracts

James D. Hamilton, Tatsuyoshi Okimoto

NBER Working Paper No. 15736
Issued in February 2010
NBER Program(s):The Monetary Economics Program

This paper 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.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w15736

Published: “Sources of Variation in Holding Returns for Fed Funds Futur es Con- tracts,” Journal of Futures Markets 31, no. 3 (2011): 205-229 (coauthored with Tatsuyoshi Okimoto). citation courtesy of

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