| Abstract: | The introduction of futures contracts did not alter the regularity in the cash market that results from the Federal Reserve regulation of the bank-settlement process. Although we find a positive preholiday effect in the Fed funds futures returns, we do not find evidence that Federal Reserve regulations cause that effect. Contrary to previous observations for other futures contracts, we find Fridays and preholidays have the largest net volume. We suggest this finding of high volume is consistent with hedging activity by financial institutions before market closings. |
