Concentration and liquidity costs in emerging commodity exchanges

Geraldo Costa; Andres Trujillo-Barrera; Joost M.E. Pennings

Concentration and liquidity costs in emerging commodity exchanges

Geraldo Costa, Andres Trujillo-Barrera, Joost M.E. Pennings

Research output: Contribution to journal › Article › Academic › peer-review

Abstract

We analyze the relationships among liquidity costs, volume, and volatility in the Brazilian agricultural futures market, along with the role of market concentration. We estimate a structural three-equation IV-GMM model using data from Bolsa, Brasil, Balcão corn and live cattle contracts from March 2014 to February 2016. Results show a negative association between liquidity costs and volume and a positive association between liquidity costs and volatility. Market concentration impacts corn and live cattle differently. Concentration contributes to volume reduction for live cattle and to liquidity costs reduction for corn. Our findings shed light on the microstructure of emerging markets.

Original language	English
Pages (from-to)	441-456
Journal	Journal of Agricultural and Resource Economics
Volume	43
Issue number	3
Publication status	Published - 1 Sept 2018

Keywords

Bid-ask spread
Volatility
Volume

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Cite this

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title = "Concentration and liquidity costs in emerging commodity exchanges",

abstract = "We analyze the relationships among liquidity costs, volume, and volatility in the Brazilian agricultural futures market, along with the role of market concentration. We estimate a structural three-equation IV-GMM model using data from Bolsa, Brasil, Balc{\~a}o corn and live cattle contracts from March 2014 to February 2016. Results show a negative association between liquidity costs and volume and a positive association between liquidity costs and volatility. Market concentration impacts corn and live cattle differently. Concentration contributes to volume reduction for live cattle and to liquidity costs reduction for corn. Our findings shed light on the microstructure of emerging markets.",

keywords = "Bid-ask spread, Volatility, Volume",

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T1 - Concentration and liquidity costs in emerging commodity exchanges

AU - Costa, Geraldo

AU - Trujillo-Barrera, Andres

AU - Pennings, Joost M.E.

PY - 2018/9/1

Y1 - 2018/9/1

N2 - We analyze the relationships among liquidity costs, volume, and volatility in the Brazilian agricultural futures market, along with the role of market concentration. We estimate a structural three-equation IV-GMM model using data from Bolsa, Brasil, Balcão corn and live cattle contracts from March 2014 to February 2016. Results show a negative association between liquidity costs and volume and a positive association between liquidity costs and volatility. Market concentration impacts corn and live cattle differently. Concentration contributes to volume reduction for live cattle and to liquidity costs reduction for corn. Our findings shed light on the microstructure of emerging markets.

AB - We analyze the relationships among liquidity costs, volume, and volatility in the Brazilian agricultural futures market, along with the role of market concentration. We estimate a structural three-equation IV-GMM model using data from Bolsa, Brasil, Balcão corn and live cattle contracts from March 2014 to February 2016. Results show a negative association between liquidity costs and volume and a positive association between liquidity costs and volatility. Market concentration impacts corn and live cattle differently. Concentration contributes to volume reduction for live cattle and to liquidity costs reduction for corn. Our findings shed light on the microstructure of emerging markets.

KW - Bid-ask spread

KW - Volatility

KW - Volume

M3 - Article

AN - SCOPUS:85054309885

SN - 1068-5502

VL - 43

SP - 441

EP - 456

JO - Journal of Agricultural and Resource Economics

JF - Journal of Agricultural and Resource Economics

IS - 3

ER -

Concentration and liquidity costs in emerging commodity exchanges

Abstract

Keywords

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