Core deposit interest rate modeling change

Research Research Design for a Design for a

Study of Study of Federal Funds Federal Funds

Futures and Futures and Consumer Consumer

Confidence as Confidence as Predictors of Predictors of Core Deposit Core Deposit

Interest RatesInterest Rates

What are research What are research questions and questions and hypotheses?hypotheses?

1. What is a good prediction model for 1. What is a good prediction model for change in core deposit interest rate (CDIR)?change in core deposit interest rate (CDIR)?

A. Are Fed Funds Futures (FFF) good indices A. Are Fed Funds Futures (FFF) good indices to predict change in core deposit interest to predict change in core deposit interest rate?rate?

We predict FFF will be a significant predictor We predict FFF will be a significant predictor of CDIR and the effect size will be large.of CDIR and the effect size will be large.

Questions and Questions and Hypotheses - continuedHypotheses - continued

B. Is consumer confidence (CC) a good index to B. Is consumer confidence (CC) a good index to predict change in core deposit interest rate?predict change in core deposit interest rate?

We predict CC is a significant predictor of CDIR We predict CC is a significant predictor of CDIR with a large effect size.with a large effect size.

C. Does a model containing both indicators C. Does a model containing both indicators (FFF and CC) predict change in core deposit (FFF and CC) predict change in core deposit interest rate better than each one individually? interest rate better than each one individually?

We predict the model containing both FFF and We predict the model containing both FFF and CC will predict CDIR better (i.e. explain a CC will predict CDIR better (i.e. explain a larger proportion of variance) than either larger proportion of variance) than either index individually.index individually.

Describe Analysis PlanDescribe Analysis Plan

Time seriesTime series

Repeated measuresRepeated measures

HLM with repeated observations on timeHLM with repeated observations on time

Logistic regressionLogistic regression

Survival analysis is recommended if the Survival analysis is recommended if the problem is posed as a whether and when problem is posed as a whether and when question, i.e., does CDIR change, and if yes, question, i.e., does CDIR change, and if yes, when does it change relative to threshold when does it change relative to threshold levels of FFF or CC.levels of FFF or CC.