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Capesize markets behavior: Explaining volatility and expectations

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  • Pelagidis, Theodore
  • Karaoulanis, Ioannis

Abstract

It is widely accepted that the highly volatile capesize market has many peculiarities. Its importance has been recently highlighted by an increase in contribution of the Baltic Capesize Index (BCI) to the Baltic Dry Index (BDI), affecting the progress of the BDI more than any other dry bulk index. This paper investigates the behavior of the capesize market focusing on expectations and time lags. Expectations play a critical role in the freight market both for the short-term and the long-term decision making. In particular, we investigate the relation between time lags and time-charter, trip and spot market rates as well as the average earnings of the capesize vessels of various ages. Time series analysis is used to reach our conclusions. The Hannan – Quinn criterion has been selected to identify the important lags of the capesize freight marketfor the period 1977–2018 and anAutoregressive (AR) model has been constructed to perform the statistical analysis. The findings indicate that there is a strong correlation between time lags and capesize freight market, forecasting indeed the behavior ofthe market. At a practical level, better understanding of the behavior of the capesize market can improve the planning decision of ship-owners and charterers alike.

Suggested Citation

  • Pelagidis, Theodore & Karaoulanis, Ioannis, 2021. "Capesize markets behavior: Explaining volatility and expectations," MPRA Paper 107034, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:107034
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    File URL: https://mpra.ub.uni-muenchen.de/107034/1/MPRA_paper_107034.pdf
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    References listed on IDEAS

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    Cited by:

    1. Ioannis Karaoulanis & Theodore Pelagidis, 2021. "Panamax markets behaviour: explaining volatility and expectations," Journal of Shipping and Trade, Springer, vol. 6(1), pages 1-24, December.

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    More about this item

    Keywords

    Capesize markets; Freight market; Expectations; Time lag; Volatility;
    All these keywords.

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • F1 - International Economics - - Trade
    • G1 - Financial Economics - - General Financial Markets
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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