Long memory testing for Fed Funds Futures’ contracts

• Autor(a) principal: Souza, Sergio R
• Data de Publicação: 2008
• Outros Autores: Cajueiro, Daniel Oliveira, Tabak, Benjamin Miranda
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Institucional da UCB
• Texto Completo: http://twingo.ucb.br:8080/jspui/handle/10869/304; https://repositorio.ucb.br:9443/jspui/handle/123456789/7462

In this paper, the evaluation of the long memory in returns and volatilities of returns of the daily prices of closing of 6 future generic contracts of Fed Funds negotiated in the Chicago Board of Trade (CBOT) is performed. This evaluation is also made for the spreads between prices of these generic contracts for the evaluation of the transmission of the effects of shock in the interest rates for the various horizons of expectations until 6 months. The study uses the classical R/S analysis for the determination of the Hurst exponent and the bootstrap through moving blocks for the determination of the standard error of the exponent. Long memory for the returns and for the volatility of the returns of the studied future contracts was identified, which suggests that the Monetary Authority of the United States has been able to maintain the stability of the interest rates in spite of shocks, or that the American economy is not significantly affected by shocks. The results of this paper also suggest that the adjustments of the expected interest rates of the Fed Funds occur quickly for the various horizons, not presenting long memory for the returns of the spreads, but for volatility.