The dynamics between freight volatility and fleet size growth in dry bulk shipping markets

Jane Jing Xu, Tsz Leung Yip, Peter B. Marlow

Research output: Journal article publicationJournal articleAcademic researchpeer-review

42 Citations (Scopus)

Abstract

This paper studies the relationship between the time-varying volatility of dry bulk freight rates and the change of the supply of fleet trading in dry bulk markets. An abundance of research has been done to understand the time-varying characteristics of freight rate volatility, yet few have discussed the determinants of freight volatility. We therefore examine freight volatility against the changes in fleet size and other shipping market variables over January 1973-October 2010. The study employs a two-step model specification. The first step is the measurement of freight rate volatility through an AR-GARCH model; the second step is the analysis of the relationship between freight rate volatility and fleet size growth through a GMM regression. We confirm similar findings in the literature that freight rate volatility is time varying. Furthermore, the results reveal that the change in fleet size positively affects freight rate volatility, while the spot rate volatility of Capesize dry bulk exhibits a stronger reaction to the change in fleet size. The results of this study contribute in a general sense to understanding the systematic risk of shipping markets.
Original languageEnglish
Pages (from-to)983-991
Number of pages9
JournalTransportation Research Part E: Logistics and Transportation Review
Volume47
Issue number6
DOIs
Publication statusPublished - 1 Jan 2011

Keywords

  • Fleet size
  • Freight markets
  • Freight volatility
  • GARCH

ASJC Scopus subject areas

  • Business and International Management
  • Transportation
  • Management Science and Operations Research

Cite this