Abstract
This article investigates the interrelationships in daily returns and volatilities between Capesize and Panamax price series in four major trading routes, the transatlantic, the fronthaul, the transpacific and the backhaul, during the sample period from 1999 to 2008. The sample is split into two sub-periods: the first runs from 3 January 1999 to 24 December 2002 and the second is from 2 January 2003 to 29 August 2008, because of the substantially different economic conditions and market features over each of these periods. Cointegration and causality tests have been made for the price series over two sub-periods and yield mixed results. The volatility spillovers between Capesize and Panamax markets are investigated by employing an extended bivariate ECM-GARCH model. The results, in terms of returns and volatilities, imply that the dynamics between the two markets change across time on different trading routes. The findings of this study contain useful information for both shipowners and charterers to mitigate risks or to make extra profits by switching between the two markets.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Akaike, H. (1973) Information theory and an extension of the maximum likelihood principle. In: B.N. Petrov and F. Csaki (eds.) Proceedings of the 2nd International Symposium on Information Theory. Budapest, Hungary: Akademia Kiado, pp. 267–281.
Alizadeh, A. (2001) An econometric analysis of the dry bulk shipping industry; seasonality, efficiency and risk premia. Unpublished PhD thesis, City University Business School, London, UK.
Beenstock, M. and Vergottis, A. (1993) Econometric Modeling of World Shipping, 1st edn. London, UK: Chapman and Hall.
Bollerslev, T. (1987) A conditional heteroskedastic time series model for speculative prices and rates of return. Review of Economics and Statistics 69: 542–547.
Bollerslev, T. and Wooldridge, J.M. (1992) Quasi-maximum likelihood estimation of dynamic models with time-varying covariance. Econometric Reviews 11: 143–172.
Baillie, R.T. and Bollerslev, T. (1995) On the interdependence of international asset markets. In: R. Aggarwal and D. Schrim (eds.) Global Portfolio Diversification: Risk Management, Market Microstructure and Implementation Issues. New York: Academic Press, pp. 19–29.
Clarkson Research Studies. (2008) Dry Bulk Trade Outlook. London: Clarksons Publications, December.
Dickey, D. and Fuller, W. (1981) Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica 49: 1057–1072.
Engle, R.F. (1982) Autoregressive conditional heteroskedasticity with estimates of the variance of United Kingdom inflation. Econometrica 50 (4): 987–1007.
Granger, C.W.J. (1988) Some recent developments in a concept of causality. Journal of Econometrics 39 (1–2): 199–211.
Jarque, C.M. and Bera, A.K. (1980) Cointegration and error correction: Representation, estimation, and testing. Econometrica 55: 251–276.
Johansen, S. (1988) Statistical analysis of cointegration vectors. Journal of Economic Dynamics and Control 12: 231–254.
Johansen, S. (1991) Estimation and hypothesis testing of cointegration vectors in gaussian vector autoregressive models. Econometrica 59: 1551–1580.
Johansen, S. and Juselius, K. (1990) Maximum likelihood and inference on cointegration-with applications to the demand for money. Oxford Bulletin of Economics and Statistics 52: 69–221.
Kavussanos, M.G. and Visvikis, I.D. (2004) Market interactions in returns and volatilities between spot and forward shipping markets. Journal of Banking and Finance 28: 2015–2204.
Ljung, M. and Box, G. (1978) On a measure of lack of fit in time series models. Biometrica 65 (2): 297–303.
Newey, W.K. and West, K. (1987) A simple positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix. Econometrica 55: 703–708.
Osterwald-Lenum, M. (1992) A note with the quantiles of the asymptotic distribution of the ML cointegration rank test statistics. Oxford Bulletin of Economics and Statistics 54: 461–472.
Phillips, P.C.B. and Perron, P. (1988) Testing for a unit root in time series regressions. Biometrica 75: 335–346.
Schwarz, G. (1978) Estimating the dimension of a model. Annals of Statistics 6: 461–464.
White, H. (1980) A heteroskedastic-consistent covariance matrix estimator and a direct test for heteroskedasticity. Econometrica 48: 817–838.
Acknowledgements
We wish to thank the editor and two anonymous referees for their valuable comments and suggestions. We are also grateful for useful comments from participants at the 2009 International Association of Maritime Economists Conference, Copenhagen, Denmark.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Chen, S., Meersman, H. & van de Voorde, E. Dynamic interrelationships in returns and volatilities between Capesize and Panamax markets. Marit Econ Logist 12, 65–90 (2010). https://doi.org/10.1057/mel.2009.19
Published:
Issue Date:
DOI: https://doi.org/10.1057/mel.2009.19