Real Effects of Centralized Markets: Evidence From Steel Futures

75 Pages Posted: 27 Dec 2018 Last revised: 10 Dec 2021

See all articles by Thorsten Martin

Thorsten Martin

Bocconi University; IGIER - Innocenzo Gasparini Institute for Economic Research

Date Written: December 6, 2021

Abstract

I study the real effects of centralized derivative markets. Exploiting the staggered arrival of futures contracts for different steel products, I find that the introduction of centralized derivatives markets: i) decreases price dispersion in the product market, ii) increases the sensitivity of producers’ market shares to their production cost, and iii) decreases prices and producers’ profits. I also find that news pointing to the introduction of centralized markets decrease the stock prices of steel producers. These results are consistent with the predictions of existing theories, which point to the role of centralized futures markets in fostering product market competition.

Keywords: Centralized Markets, Commodity Derivatives, Real Effects, Product Markets

JEL Classification: G14, G23, G32, L11, L61

Suggested Citation

Martin, Thorsten, Real Effects of Centralized Markets: Evidence From Steel Futures (December 6, 2021). Available at SSRN: https://ssrn.com/abstract=3299384 or http://dx.doi.org/10.2139/ssrn.3299384

Thorsten Martin (Contact Author)

Bocconi University ( email )

Via Roentgen 1
Milan, 20136
Italy

HOME PAGE: http://https://sites.google.com/view/thorstenmartin

IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

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