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Asset Bubbles in Shipping? An Analysis of Recent History in the Drybulk Market

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  • Roar Adland

    ([1] Dalian Maritime University, Dalian, P.R. China [2] Clarkson Fund Management Ltd., London, UK)

  • Haiying Jia

    (Cass Business School, City University, London, UK)

  • Siri Strandenes

    (Centre for International Economics and Shipping (SIØS), Norwegian School of Economics and Business Administration, Bergen, Norway)

Abstract

The purpose of this paper is to investigate the hypothesis that the freight market boom in the drybulk freight market between 2003 and 2005 caused asset values in the second-hand market to deviate from underlying fundamentals. We test the instantaneous equilibrium relationship between the markets for second-hand ships, newbuildings and freight in a Vector Error Correction Model (VECM) framework. We also estimate and account for the time-varying delivery lag in the newbuilding market. Our empirical results suggest that the second-hand market was closely cointegrated with the fundamental freight and newbuilding market with no evidence of a short-term asset ‘bubble’. Maritime Economics & Logistics (2006) 8, 223–233. doi:10.1057/palgrave.mel.9100162

Suggested Citation

  • Roar Adland & Haiying Jia & Siri Strandenes, 2006. "Asset Bubbles in Shipping? An Analysis of Recent History in the Drybulk Market," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 8(3), pages 223-233, September.
    • Handle: RePEc:pal:marecl:v:8:y:2006:i:3:p:223-233
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    Citations

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    Cited by:

    1. Xiwen Bai & Jasmine Siu Lee Lam, 2019. "An integrated analysis of interrelationships within the very large gas carrier (VLGC) shipping market," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 21(3), pages 372-389, September.
    2. Alexandridis, George & Kavussanos, Manolis G. & Kim, Chi Y. & Tsouknidis, Dimitris A. & Visvikis, Ilias D., 2018. "A survey of shipping finance research: Setting the future research agenda," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 115(C), pages 164-212.
    3. Theodore Syriopoulos & Michael Tsatsaronis & Ioannis Karamanos, 2021. "Support Vector Machine Algorithms: An Application to Ship Price Forecasting," Computational Economics, Springer;Society for Computational Economics, vol. 57(1), pages 55-87, January.
    4. Heij, C. & Knapp, S., 2012. "Dynamics in the dry bulk market," Econometric Institute Research Papers EI 2012-18, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    5. Moutzouris, Ioannis C. & Nomikos, Nikos K., 2020. "Asset pricing with mean reversion: The case of ships," Journal of Banking & Finance, Elsevier, vol. 111(C).
    6. Alizadeh, Amir H. & Thanopoulou, Helen & Yip, Tsz Leung, 2017. "Investors’ behavior and dynamics of ship prices: A heterogeneous agent model," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 106(C), pages 98-114.

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