IDEAS home Printed from https://ideas.repec.org/a/tpe/jtecpo/v40y2006i3p449-472.html
   My bibliography  Save this article

Are Spot Freight Rates Stationary?

Author

Listed:
  • Steen Koekebakker
  • Roar Adland
  • Sigbjørn Sødal

Abstract

In the recent literature, empirical tests of stationarity of freight rates often conclude that spot freight rates are non-stationary processes. However, many maritime economists would argue that the freight rate cannot exhibit asymptotically explosive behaviour, as implied by non-stationarity, in a perfectly competitive freight market. This paper restates the theoretical arguments behind mean reversion and boundedness of the spot freight rate process and suggests that the failure to reject non-stationarity may be due to the weak power of the tests most frequently used. We employ a non-linear version of the Augmented Dickey-Fuller (ADF) test, based on an exponentially smooth-transition autoregressive model (ESTAR). This test enhances the power against mean-reverting nonlinear alternative hypotheses compared to the linear alternative for traditional ADF tests. Our empirical results show, in line with maritime economic theory, that freight rates in both dry-bulk and tanker markets are non-linear stationary. © 2006 LSE and the University of Bath

Suggested Citation

  • Steen Koekebakker & Roar Adland & Sigbjørn Sødal, 2006. "Are Spot Freight Rates Stationary?," Journal of Transport Economics and Policy, University of Bath, vol. 40(3), pages 449-472, September.
    • Handle: RePEc:tpe:jtecpo:v:40:y:2006:i:3:p:449-472
    as

    Download full text from publisher

    File URL: http://www.catchword.com/cgi-bin/cgi?ini=bc&body=linker&reqidx=0022-5258(20060901)40:3L.449;1-
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

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


    Cited by:

    1. Alizadeh, Amir H. & Huang, Chih-Yueh & van Dellen, Stefan, 2015. "A regime switching approach for hedging tanker shipping freight rates," Energy Economics, Elsevier, vol. 49(C), pages 44-59.
    2. Xin Wang & Stein W. Wallace, 2016. "Stochastic scheduled service network design in the presence of a spot market for excess capacity," EURO Journal on Transportation and Logistics, Springer;EURO - The Association of European Operational Research Societies, vol. 5(4), pages 393-413, December.
    3. Fotis Papailias & Dimitrios D. Thomakos & Jiadong Liu, 2017. "The Baltic Dry Index: cyclicalities, forecasting and hedging strategies," Empirical Economics, Springer, vol. 52(1), pages 255-282, February.
    4. Sigbjørn Sødal & Steen Koekebakker & Roar Aadland, 2008. "Market switching in shipping — A real option model applied to the valuation of combination carriers," Review of Financial Economics, John Wiley & Sons, vol. 17(3), pages 183-203, August.
    5. Javier Población & Gregorio Serna, 2018. "A common long-term trend for bulk shipping prices," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 20(3), pages 421-432, September.
    6. Okan Duru, 2017. "The Origin and Consistency of the Ton–Mile Metric in the Shipping Economics," Logistics, MDPI, vol. 1(1), pages 1-8, February.
    7. Sødal, Sigbjørn & Koekebakker, Steen & Aadland, Roar, 2008. "Market switching in shipping -- A real option model applied to the valuation of combination carriers," Review of Financial Economics, Elsevier, vol. 17(3), pages 183-203, August.
    8. Prochazka, Vit & Adland, Roar & Wallace, Stein W., 2019. "The value of foresight in the drybulk freight market," Transportation Research Part A: Policy and Practice, Elsevier, vol. 129(C), pages 232-245.
    9. Spyros Makridakis & Andreas Merikas & Anna Merika & Mike G. Tsionas & Marwan Izzeldin, 2020. "A novel forecasting model for the Baltic dry index utilizing optimal squeezing," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 39(1), pages 56-68, January.
    10. Koichiro Hayashi, 2020. "Stationarity of spot freight rates considering supply/demand effect," Journal of Shipping and Trade, Springer, vol. 5(1), pages 1-9, December.
    11. Adland, Roar & Jia, Haiying & Lu, Jing, 2008. "Price dynamics in the market for Liquid Petroleum Gas transport," Energy Economics, Elsevier, vol. 30(3), pages 818-828, May.
    12. Kou, Ying & Luo, Meifeng, 2018. "Market driven ship investment decision using the real option approach," Transportation Research Part A: Policy and Practice, Elsevier, vol. 118(C), pages 714-729.
    13. Adland, Roar & Prochazka, Vit, 2021. "The value of timecharter optionality in the drybulk market," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 145(C).
    14. Roar Adland & Pierre Cariou & François-Charles Wolff, 2018. "Comparing transaction-based and expert-generated price indices in the market for offshore support vessels," Working Papers halshs-01843720, HAL.
    15. Roar Adland & Haakon Ameln & Eirik A. Børnes, 2020. "Hedging ship price risk using freight derivatives in the drybulk market," Journal of Shipping and Trade, Springer, vol. 5(1), pages 1-18, December.
    16. Nwokedi, Theophilus Chinonyerem & Odumodu Chigozie Uzoma & Hilary, Owoidighe Efanga & Maduabuchukwu Chukwuemeka Donason & Olusegu, Sodiq Buhari, 2019. "Ship Sales and Purchases Market: Modeling the Influences of Seaborne Trade and Charter Rates/Freight on Dead Weight Tonnage of Global new Building Orders," International Journal of Science and Business, IJSAB International, vol. 3(2), pages 1-10.
    17. Javier Población, 2017. "Are recent tanker freight rates stationary?," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 19(4), pages 650-666, December.

    More about this item

    Statistics

    Access and download statistics

    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:tpe:jtecpo:v:40:y:2006:i:3:p:449-472. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Christopher F. Baum (email available below). General contact details of provider: http://www.bath.ac.uk/e-journals/jtep .

    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.