Journal of Marine Science and Technology

Journal of Marine Science and Technology

Excess return on bulk shipping markets

Document Type : Original Manuscript

Authors
Kosar Heyydari 1
Kasra Pourkermani 2
1 Department of Marine Transport, Khorrmshahr
2 Faculty of Economics, Khorramshahr University of Marine Sciences and Technology
10.22113/jmst.2019.122222.2136
Abstract
This research investigates the dynamics of excess return on vessels trip charter and time charter in travel leases and rental of the specified route in bulk dry market. Initially, using a weekly dataset between January 2003 and January 2016, a long-term co-integration relationship between temporary travel contracts and maritime-specific contracts was evaluated in the ship's temporary lease equations. Then, a new method was developed based on technical analysis to identify surplus return signals and the formation of a business strategy. Accordingly, our focus was on short-term deviations and we developed a leasing strategy for technical analysis. In particular, we designed the MMTM method and formed a rental strategy. Finally, we tested our strategy for a simple weekly entry into a specific lease. The results show that our method performs better than the benchmark strategy and reveals that a proper utilization of market price deviations will result in significant surplus returns.
Keywords
shipping
shipping market
temporary lease
specific route rental
technical analysis

Subjects

Adland, R. and Cullinane, K. 2006. A time varing risk premium in the term structure of bulk shipping freight rates. Journal of Transport Economics and Policy. 39(2): 191–208.
Adland, R. and Strandenes, S. 2006. Market efficiency in the bulk freight market revisited. Maritime Policy and Management. 33(2): 107–17.
Alizadeh, A.H. and Nomikos, N. K. 2006a. Trading strategies in the market for tankers. Maritime Policy and Management. 33(2): 119–40.
Alizadeh, A. H. and Nomikos, N. K. 2007a. Dynamics of the Term Structure and Volatility of Shipping Freight Rate. Seattle, W. A. INFORMS.
Alizadeh, A. H. and Nomikos, N. K. 2007b. Investment timing and trading strategies in the sale and purchase market for ships. Transport Research. 41(1): 126–43.
Engle, R. F. and Granger, C. W. J. 1987. Cointegration and error correction. Representation estimation and testing. Econometrica. 55:251−276.
Glen, D., Owen, M. and Meer, V. D. 1981. Spot and time charter rates for tankers: 1970–77. Journal of Transport Economics and Policy. 1: 45–58.
Hong, H. and Stein, J. 1999. A unified theory of underreaction, momentum trading, and overreaction in asset markets. Journal of Finance. 54: 2143-84.
Johansen, S. 2005. Statistical Analysis of Cointegration Vectors. Journal of Economic Dynamics and Control. 12(2–3(: 231–254.
Kavussanos, M. G. (1996). Comparisons of volatility in the dry-cargo ship sector. Spot versus time charters, and small versus larger vessels. Journal of Transport Economics: 67–82.
Koekebakker, S. and Ådland, R. 2004. Modelling forward freight rate dynamics—empirical evidence from time charter rates. Maritime Policy and Management. 68 (5).
Kavussanos, M. G. and Alizadeh, A. H. 2002. The expectations hypothesis of the term structure and risk premium in dry bulk shipping freight markets. Journal of Transport Economics and Policy. 36(2): 267–304.
McMillan, D. 2001. Nonlinear predictibility of stock market returns: evidence from nonparametric and threshold models. International Review of Economics and Finance, 10: 353–68.
Phillips, P. C. B. and Perron, P. 1988. Testing for a unit root in time series regression. Biometrika,. 75: 335–46
Tvedt, J. 2003. A new perspective on price dynamics of the dry bulk market. Maritime Policy and Management. 30(3): 221–30.
Veenstra, A. 1999. Quantitative Analysis of Shipping Markets. Delft: Delft University Press.
Wilder Jr, J. W. 1987. The Adam Theory of Markets. Or What Matters is Profit. Cavida Ltd. McLeansville, NC USA.
Zannetos, Z. S. 1966. The Theory of Oil Tankship Rates: An Economic Analysis of Tankship Operations (No. 4).

  • Receive Date 17 April 2018
  • Revise Date 29 January 2019
  • Accept Date 07 April 2019
  • Publish Date 22 May 2021