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Dynamics of the Term Structure and Volatility of Shipping Freight Rates

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Author Info

  • Amir H. Alizadeh
  • Nikos K. Nomikos

Abstract

This paper investigates the relationship between the dynamics of the term structure and time-varying volatility of shipping freight rates. Using a dataset covering the period from January 1992 to September 2007 and augmented EGARCH models, we find support for the argument that the volatility of freight rates is related to the shape of the term structure of the freight market. Furthermore, it is found that this relationship is asymmetric in the sense that when the freight market is in backwardation, volatility is higher compared to periods when the market is in contango. The results have important implications for freight risk analysis and management. © 2011 LSE and the University of Bath

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Bibliographic Info

Article provided by London School of Economics and University of Bath in its journal Journal of Transport Economics and Policy (JTEP).

Volume (Year): 45 (2011)
Issue (Month): 1 (January)
Pages: 105-128

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Handle: RePEc:tpe:jtecpo:v:45:y:2011:i:1:p:105-128

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Web page: http://www.bath.ac.uk/e-journals/jtep

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Cited by:
  1. Xu, Jane Jing & Yip, Tsz Leung & Marlow, Peter B., 2011. "The dynamics between freight volatility and fleet size growth in dry bulk shipping markets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 47(6), pages 983-991.

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