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Real Effects of Centralized Markets: Evidence from Steel Futures

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  • Thorsten Martin

Abstract

I study the real effects of centralized derivative markets using the staggered introduction of futures contracts for different steel products in the United States. Employing a difference-in-differences strategy, I find that the arrival of centralized futures markets improves price transparency and risk management in the underlying product market: price dispersion decreases and steel producers increase their hedging activity. Moreover, market share is reallocated toward low-cost producers, while product prices, producers’ profits, and valuations decrease. Overall, the results indicate that centralized futures markets foster competition in the product market.

Suggested Citation

  • Thorsten Martin, 2025. "Real Effects of Centralized Markets: Evidence from Steel Futures," The Review of Financial Studies, Society for Financial Studies, vol. 38(7), pages 2140-2181.
    • Handle: RePEc:oup:rfinst:v:38:y:2025:i:7:p:2140-2181.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhaf011
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    More about this item

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L61 - Industrial Organization - - Industry Studies: Manufacturing - - - Metals and Metal Products; Cement; Glass; Ceramics

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