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Concentration and Liquidity Costs in Emerging Commodity Exchanges

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

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.

Suggested Citation

  • Costa, Geraldo Jr. & Trujillo-Barrera, Andres & Pennings, Joost M.E., 2018. "Concentration and Liquidity Costs in Emerging Commodity Exchanges," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 43(3), September.
    • Handle: RePEc:ags:jlaare:276504
    DOI: 10.22004/ag.econ.276504
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