Correlation and volatility dynamics across international freight indices
SubjectFreight market ; Freight and freightage ; Ναυτιλιακή οικονομική ; Ναυτιλία -- Οικονομετρικές μέθοδοι
This paper aims to provide correlation, volatility and dynamics across international freight indices. The findings of this dissertation are of critical importance in development and construction of investment portfolios in the maritime sector especially on periods the experience high volatility or market shocks. We incorporate three existing indices the BDI (Baltic Dry Index) that tracks worldwide international shipping prices of various dry bulk cargoes, BEP (Baltic Exchange Panamax Index) which is one of the four indices that are forming BDI and BEC (Baltic Exchange Capesize Index). Using prediction models we aim to investigate two scenarios. The first is if there are statistically correlated positively or not the three above mentioned indices, and secondly the objective is to investigate if those indices are following a lead lag pattern after a market's shock. The data of this dissertation were collected from the Shipping Intelligent Network operated by Clarksons. Our results seem to suggest that there were time lags between these three indices. Moreover, the relationship between those indices was more positive rather negative. The message of the findings for a diversified investment portfolio is that worldwide shocks affect the volatility and the correlation of those markets so any possible risk diversification benefits in positively related assets. In addition it is important to realize the value of rebalancing of those portfolios due to the time-varying nature of those indices correlations. Although it is important to mention that due to the several internal and external factors that the maritime sector is affected from, and the global environment that this sector operates is difficult to evaluate and utilize the analysis.