IDEAS home Printed from https://ideas.repec.org/a/mir/mirbus/v1y2011i1p20-44.html
   My bibliography  Save this article

Measuring level of risk exposure in tanker Shipping freight markets

Author

Listed:
  • WESSAM M. T. ABOUARGHOUB

    (Centre for Global Finance,Bristol Business School,University of the West of England, Bristol)

  • IRIS BIEFANG-FRISANCHO MARISCAL

    (Centre for Global Finance,Bristol Business School,University of the West of England, Bristol)

Abstract

This is an attempt to study the volatility structure of the tanker freight market and its exposure to market shocks. Therefore, we introduce a two state regime to investigate the possibility of two different volatility structures in shipping tanker freight markets. Empirical evidence is found that in general terms, shipping tanker freight returns, shift between two regimes, a high volatility regime and a low volatility regime and that market shocks in general increase the volatility of freight returns and has a lasting effect. In regards to measuring freight risk, it seams that semi-parametric approaches are appropriate methods for measuring level of risk exposure for shipping freight markets.

Suggested Citation

  • Wessam M. T. Abouarghoub & Iris Biefang-Frisancho Mariscal, 2011. "Measuring level of risk exposure in tanker Shipping freight markets," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 1(1), pages 20-44, December.
    • Handle: RePEc:mir:mirbus:v:1:y:2011:i:1:p:20-44
    as

    Download full text from publisher

    File URL: http://thejournalofbusiness.org/index.php/site/article/view/211/210
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Gail Pacheco & De Wet van der Westhuizen & Don J. Webber, 2012. "The changing influence of culture on job satisfaction across Europe: 1981-2008," Working Papers 2012-06, Auckland University of Technology, Department of Economics.
    2. Hamilton, James D & Gang, Lin, 1996. "Stock Market Volatility and the Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(5), pages 573-593, Sept.-Oct.
    3. Y. K. Tse, 2002. "Residual-based diagnostics for conditional heteroscedasticity models," Econometrics Journal, Royal Economic Society, vol. 5(2), pages 358-374, June.
    4. Christoffersen, Peter F, 1998. "Evaluating Interval Forecasts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 841-862, November.
    5. Andersen, Torben G & Bollerslev, Tim, 1998. "Answering the Skeptics: Yes, Standard Volatility Models Do Provide Accurate Forecasts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 885-905, November.
    6. Engel, Charles & Hamilton, James D, 1990. "Long Swings in the Dollar: Are They in the Data and Do Markets Know It?," American Economic Review, American Economic Association, vol. 80(4), pages 689-713, September.
    7. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
    8. Amir H. Alizadeh & Nikos K. Nomikos, 2011. "Dynamics of the Term Structure and Volatility of Shipping Freight Rates," Journal of Transport Economics and Policy, University of Bath, vol. 45(1), pages 105-128, January.
    9. Christoffersen, Peter & Hahn, Jinyong & Inoue, Atsushi, 2001. "Testing and comparing Value-at-Risk measures," Journal of Empirical Finance, Elsevier, vol. 8(3), pages 325-342, July.
    10. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    11. Lu Jing & Peter B. Marlow & Wang Hui, 2008. "An analysis of freight rate volatility in dry bulk shipping markets," Maritime Policy & Management, Taylor & Francis Journals, vol. 35(3), pages 237-251, June.
    12. Bollerslev, Tim & Engle, Robert F & Wooldridge, Jeffrey M, 1988. "A Capital Asset Pricing Model with Time-Varying Covariances," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 116-131, February.
    13. Suzanne Fry & Felix Ritchie, 2012. "Issues in the measurement of low pay: 2010," Working Papers 20121210, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    14. Wessam M. T. Abouarghoub & Iris Biefang-Frisancho Mariscal, 2011. "Measuring level of risk exposure in tanker Shipping freight markets," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 1(1), pages 20-44, December.
    15. Christoffersen, Peter, 2011. "Elements of Financial Risk Management," Elsevier Monographs, Elsevier, edition 2, number 9780123744487.
    16. Hamilton, James D., 1988. "Rational-expectations econometric analysis of changes in regime : An investigation of the term structure of interest rates," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 385-423.
    17. Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 5-59.
    18. Bollerslev, Tim, 1987. "A Conditionally Heteroskedastic Time Series Model for Speculative Prices and Rates of Return," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 542-547, August.
    19. Hamilton, James D. & Susmel, Raul, 1994. "Autoregressive conditional heteroskedasticity and changes in regime," Journal of Econometrics, Elsevier, vol. 64(1-2), pages 307-333.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wessam M. T. Abouarghoub & Iris Biefang-Frisancho Mariscal, 2011. "Measuring level of risk exposure in tanker Shipping freight markets," International Journal of Business and Social Research, LAR Center Press, vol. 1(1), pages 20-44, December.
    2. Wessam Abouarghoub & Iris Biefang-Frisancho Mariscal & Peter Howells, 2013. "A two-state Markov-switching distinctive conditional variance application for tanker freight returns," Working Papers 20131314, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    3. Charalampos Basdekis & Apostolos Christopoulos & Alexandros Gkolfinopoulos & Ioannis Katsampoxakis, 2022. "VaR as a risk management framework for the spot and futures tanker markets," Operational Research, Springer, vol. 22(4), pages 4287-4352, September.
    4. Wessam M. T. Abouarghoub & Iris Biefang-Frisancho Mariscal, 2011. "Measuring level of risk exposure in tanker Shipping freight markets," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 1(1), pages 20-44, December.
    5. Baştuğ, Sedat & Haralambides, Hercules & Akan, Ercan & Kiraci, Kasim, 2023. "Risk mitigation in service industries: A research agenda on container shipping," Transport Policy, Elsevier, vol. 141(C), pages 232-244.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wessam M. T. Abouarghoub & Iris Biefang-Frisancho Mariscal, 2011. "Measuring level of risk exposure in tanker Shipping freight markets," International Journal of Business and Social Research, LAR Center Press, vol. 1(1), pages 20-44, December.
    2. Franses,Philip Hans & Dijk,Dick van, 2000. "Non-Linear Time Series Models in Empirical Finance," Cambridge Books, Cambridge University Press, number 9780521779654, January.
    3. Andersen, Torben G. & Bollerslev, Tim & Christoffersen, Peter F. & Diebold, Francis X., 2006. "Volatility and Correlation Forecasting," Handbook of Economic Forecasting, in: G. Elliott & C. Granger & A. Timmermann (ed.), Handbook of Economic Forecasting, edition 1, volume 1, chapter 15, pages 777-878, Elsevier.
    4. Torben G. Andersen & Tim Bollerslev & Peter F. Christoffersen & Francis X. Diebold, 2005. "Volatility Forecasting," PIER Working Paper Archive 05-011, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    5. Pagan, Adrian, 1996. "The econometrics of financial markets," Journal of Empirical Finance, Elsevier, vol. 3(1), pages 15-102, May.
    6. LeBaron, Blake, 2003. "Non-Linear Time Series Models in Empirical Finance,: Philip Hans Franses and Dick van Dijk, Cambridge University Press, Cambridge, 2000, 296 pp., Paperback, ISBN 0-521-77965-0, $33, [UK pound]22.95, [," International Journal of Forecasting, Elsevier, vol. 19(4), pages 751-752.
    7. Degiannakis, Stavros & Xekalaki, Evdokia, 2004. "Autoregressive Conditional Heteroskedasticity (ARCH) Models: A Review," MPRA Paper 80487, University Library of Munich, Germany.
    8. Maheu, John M. & McCurdy, Thomas H., 2000. "Volatility dynamics under duration-dependent mixing," Journal of Empirical Finance, Elsevier, vol. 7(3-4), pages 345-372, November.
    9. BAUWENS, Luc & HAFNER, Christian & LAURENT, Sébastien, 2011. "Volatility models," LIDAM Discussion Papers CORE 2011058, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
      • Bauwens, L. & Hafner, C. & Laurent, S., 2012. "Volatility Models," LIDAM Reprints ISBA 2012028, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
      • Bauwens, L. & Hafner C. & Laurent, S., 2011. "Volatility Models," LIDAM Discussion Papers ISBA 2011044, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
    10. Ryan Lemand, 2003. "Should Stock Market Indexes Time Varying Correlations Be Taken Into Account? A Conditional Variance Multivariate Approach," Econometrics 0307004, University Library of Munich, Germany, revised 07 Dec 2020.
    11. Richard D. F. Harris & Murat Mazibas, 2022. "A component Markov regime‐switching autoregressive conditional range model," Bulletin of Economic Research, Wiley Blackwell, vol. 74(2), pages 650-683, April.
    12. Andersen, Torben G. & Bollerslev, Tim & Christoffersen, Peter F. & Diebold, Francis X., 2013. "Financial Risk Measurement for Financial Risk Management," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 1127-1220, Elsevier.
    13. Tim Bollerslev, 2008. "Glossary to ARCH (GARCH)," CREATES Research Papers 2008-49, Department of Economics and Business Economics, Aarhus University.
    14. Francois Chesnay & Eric Jondeau, 2001. "Does Correlation Between Stock Returns Really Increase During Turbulent Periods?," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 30(1), pages 53-80, February.
    15. Rossi, Alessandro & Gallo, Giampiero M., 2006. "Volatility estimation via hidden Markov models," Journal of Empirical Finance, Elsevier, vol. 13(2), pages 203-230, March.
    16. Halkos, George & Tzirivis, Apostolos, 2018. "Effective energy commodities’ risk management: Econometric modeling of price volatility," MPRA Paper 90781, University Library of Munich, Germany.
    17. Laurent Calvet & Adlai Fisher, 2003. "Regime-Switching and the Estimation of Multifractal Processes," Harvard Institute of Economic Research Working Papers 1999, Harvard - Institute of Economic Research.
    18. Andrew Ang & Allan Timmermann, 2012. "Regime Changes and Financial Markets," Annual Review of Financial Economics, Annual Reviews, vol. 4(1), pages 313-337, October.
    19. Michael Frömmel, 2010. "Volatility Regimes in Central and Eastern European Countries’ Exchange Rates," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 60(1), pages 2-21, February.
    20. Ho, Kin-Yip & Shi, Yanlin & Zhang, Zhaoyong, 2013. "How does news sentiment impact asset volatility? Evidence from long memory and regime-switching approaches," The North American Journal of Economics and Finance, Elsevier, vol. 26(C), pages 436-456.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mir:mirbus:v:1:y:2011:i:1:p:20-44. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: M Kabir (email available below). General contact details of provider: https://edirc.repec.org/data/csmirus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.