IDEAS home Printed from https://ideas.repec.org/a/eee/transe/v155y2021ics1366554521002520.html
   My bibliography  Save this article

Shipping sentiment and the dry bulk shipping freight market: New evidence from newspaper coverage

Author

Listed:
  • Bai, Xiwen
  • Lam, Jasmine Siu Lee
  • Jakher, Astha

Abstract

In this paper, a shipping sentiment index in the dry bulk market is constructed using computational text analysis from shipping news archives. Our news corpus consists of 11,296 dry bulk news headlines from two major shipping news websites from January 2014 to November 2020. The constructed monthly index does track closely with major dry bulk freight indices. Then, we investigate how the freight market responds, if at all, to sentiment shock and whether news sentiment helps predict freight rates. Specifically, impulse response analyses using vector autoregression (VAR) models are employed to examine the effect of sentiment shocks on freight indices. The predictive power of the constructed shipping sentiment index for future dry bulk freight rates is further investigated using a least absolute shrinkage and selection operation (LASSO) regression. To examine potential asymmetric relationship between dry bulk freight rates and news sentiment, copula models are then utilized. Results show that the constructed news sentiment index is a significant predictor for the future freight rates, especially in the Capesize market. The effect of sentiment shocks is relatively transitory and varies across different dry bulk sub-segments. Last but not least, the impact of news sentiment on the dry bulk freight rates is asymmetric and tends to be higher when the sentiment is extremely positive, and such tail dependence is more obvious for the larger Capesize segment. This study provides significant implications and decision support for shipping players.

Suggested Citation

  • Bai, Xiwen & Lam, Jasmine Siu Lee & Jakher, Astha, 2021. "Shipping sentiment and the dry bulk shipping freight market: New evidence from newspaper coverage," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 155(C).
    • Handle: RePEc:eee:transe:v:155:y:2021:i:c:s1366554521002520
    DOI: 10.1016/j.tre.2021.102490
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1366554521002520
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.tre.2021.102490?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

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

    References listed on IDEAS

    as
    1. Sanjiv R. Das & Mike Y. Chen, 2007. "Yahoo! for Amazon: Sentiment Extraction from Small Talk on the Web," Management Science, INFORMS, vol. 53(9), pages 1375-1388, September.
    2. Carroll, Christopher D & Fuhrer, Jeffrey C & Wilcox, David W, 1994. "Does Consumer Sentiment Forecast Household Spending? If So, Why?," American Economic Review, American Economic Association, vol. 84(5), pages 1397-1408, December.
    3. J. M. Keynes, 1937. "The General Theory of Employment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 51(2), pages 209-223.
    4. Tim Loughran & Bill McDonald, 2015. "The Use of Word Lists in Textual Analysis," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 16(1), pages 1-11, January.
    5. Ghosh, Sajal, 2006. "Steel consumption and economic growth: Evidence from India," Resources Policy, Elsevier, vol. 31(1), pages 7-11, March.
    6. Aloui, Riadh & Hammoudeh, Shawkat & Nguyen, Duc Khuong, 2013. "A time-varying copula approach to oil and stock market dependence: The case of transition economies," Energy Economics, Elsevier, vol. 39(C), pages 208-221.
    7. Audrino, Francesco & Sigrist, Fabio & Ballinari, Daniele, 2020. "The impact of sentiment and attention measures on stock market volatility," International Journal of Forecasting, Elsevier, vol. 36(2), pages 334-357.
    8. Schmeling, Maik, 2009. "Investor sentiment and stock returns: Some international evidence," Journal of Empirical Finance, Elsevier, vol. 16(3), pages 394-408, June.
    9. Lim, Kian Guan & Nomikos, Nikos K. & Yap, Nelson, 2019. "Understanding the fundamentals of freight markets volatility," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 130(C), pages 1-15.
    10. Nikos C. Papapostolou & Nikos K. Nomikos & Panos K. Pouliasis & Ioannis Kyriakou, 2014. "Investor Sentiment for Real Assets: The Case of Dry Bulk Shipping Market," Review of Finance, European Finance Association, vol. 18(4), pages 1507-1539.
    11. Larsen, Vegard H. & Thorsrud, Leif Anders & Zhulanova, Julia, 2021. "News-driven inflation expectations and information rigidities," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 507-520.
    12. Gkochari, Christiana C., 2015. "Optimal investment timing in the dry bulk shipping sector," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 79(C), pages 102-109.
    13. Shapiro, Adam Hale & Sudhof, Moritz & Wilson, Daniel J., 2022. "Measuring news sentiment," Journal of Econometrics, Elsevier, vol. 228(2), pages 221-243.
    14. Malcolm Baker & Jeffrey Wurgler, 2007. "Investor Sentiment in the Stock Market," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 129-152, Spring.
    15. Calomiris, Charles W. & Mamaysky, Harry, 2019. "How news and its context drive risk and returns around the world," Journal of Financial Economics, Elsevier, vol. 133(2), pages 299-336.
    16. Angelopoulos, Jason & Sahoo, Satya & Visvikis, Ilias D., 2020. "Commodity and transportation economic market interactions revisited: New evidence from a dynamic factor model," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 133(C).
    17. Adland, Roar & Cariou, Pierre & Wolff, Francois-Charles, 2016. "The influence of charterers and owners on bulk shipping freight rates," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 86(C), pages 69-82.
    18. Alizadeh, Amir H. & Talley, Wayne K., 2011. "Vessel and voyage determinants of tanker freight rates and contract times," Transport Policy, Elsevier, vol. 18(5), pages 665-675, September.
    19. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
    20. Baker, Malcolm & Wurgler, Jeffrey & Yuan, Yu, 2012. "Global, local, and contagious investor sentiment," Journal of Financial Economics, Elsevier, vol. 104(2), pages 272-287.
    21. Bai, Xiwen & Lam, Jasmine Siu Lee, 2021. "Freight rate co-movement and risk spillovers in the product tanker shipping market: A copula analysis," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 149(C).
    22. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
    23. Robert B. Barsky & Eric R. Sims, 2012. "Information, Animal Spirits, and the Meaning of Innovations in Consumer Confidence," American Economic Review, American Economic Association, vol. 102(4), pages 1343-1377, June.
    24. Papapostolou, Nikos C. & Pouliasis, Panos K. & Nomikos, Nikos K. & Kyriakou, Ioannis, 2016. "Shipping investor sentiment and international stock return predictability," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 96(C), pages 81-94.
    25. John H. Cochrane, 1994. "Permanent and Transitory Components of GNP and Stock Prices," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(1), pages 241-265.
    26. 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.
    27. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
    28. Bai, Xiwen & Lam, Jasmine Siu Lee, 2019. "A copula-GARCH approach for analyzing dynamic conditional dependency structure between liquefied petroleum gas freight rate, product price arbitrage and crude oil price," Energy Economics, Elsevier, vol. 78(C), pages 412-427.
    29. Souleles, Nicholas S, 2004. "Expectations, Heterogeneous Forecast Errors, and Consumption: Micro Evidence from the Michigan Consumer Sentiment Surveys," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(1), pages 39-72, February.
    30. Gavriilidis, Konstantinos & Kambouroudis, Dimos S. & Tsakou, Katerina & Tsouknidis, Dimitris A., 2018. "Volatility forecasting across tanker freight rates: The role of oil price shocks," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 118(C), pages 376-391.
    31. Brown, Gregory W. & Cliff, Michael T., 2004. "Investor sentiment and the near-term stock market," Journal of Empirical Finance, Elsevier, vol. 11(1), pages 1-27, January.
    32. Paul C. Tetlock, 2007. "Giving Content to Investor Sentiment: The Role of Media in the Stock Market," Journal of Finance, American Finance Association, vol. 62(3), pages 1139-1168, June.
    33. Kavussanos, Manolis G. & Alizadeh-M, Amir H., 2001. "Seasonality patterns in dry bulk shipping spot and time charter freight rates," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 37(6), pages 443-467, December.
    34. Ardia, David & Bluteau, Keven & Boudt, Kris, 2019. "Questioning the news about economic growth: Sparse forecasting using thousands of news-based sentiment values," International Journal of Forecasting, Elsevier, vol. 35(4), pages 1370-1386.
    35. 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.
    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. Gu, Bingmei & Liu, Jiaguo, 2022. "Determinants of dry bulk shipping freight rates: Considering Chinese manufacturing industry and economic policy uncertainty," Transport Policy, Elsevier, vol. 129(C), pages 66-77.

    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. Andres Algaba & David Ardia & Keven Bluteau & Samuel Borms & Kris Boudt, 2020. "Econometrics Meets Sentiment: An Overview Of Methodology And Applications," Journal of Economic Surveys, Wiley Blackwell, vol. 34(3), pages 512-547, July.
    2. Papapostolou, Nikos C. & Pouliasis, Panos K. & Nomikos, Nikos K. & Kyriakou, Ioannis, 2016. "Shipping investor sentiment and international stock return predictability," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 96(C), pages 81-94.
    3. Kim, Soon-Ho & Kim, Dongcheol, 2014. "Investor sentiment from internet message postings and the predictability of stock returns," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PB), pages 708-729.
    4. Fang, Hao & Chung, Chien-Ping & Lu, Yang-Cheng & Lee, Yen-Hsien & Wang, Wen-Hao, 2021. "The impacts of investors' sentiments on stock returns using fintech approaches," International Review of Financial Analysis, Elsevier, vol. 77(C).
    5. Anand, Abhinav & Basu, Sankarshan & Pathak, Jalaj & Thampy, Ashok, 2021. "The impact of sentiment on emerging stock markets," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 161-177.
    6. Gric, Zuzana & Ehrenbergerova, Dominika & Hodula, Martin, 2022. "The power of sentiment: Irrational beliefs of households and consumer loan dynamics," Journal of Financial Stability, Elsevier, vol. 59(C).
    7. Siganos, Antonios & Vagenas-Nanos, Evangelos & Verwijmeren, Patrick, 2014. "Facebook's daily sentiment and international stock markets," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PB), pages 730-743.
    8. Lutz, Chandler, 2015. "The impact of conventional and unconventional monetary policy on investor sentiment," Journal of Banking & Finance, Elsevier, vol. 61(C), pages 89-105.
    9. Hanjo Odendaal & Monique Reid & Johann F. Kirsten, 2020. "Media‐Based Sentiment Indices as an Alternative Measure of Consumer Confidence," South African Journal of Economics, Economic Society of South Africa, vol. 88(4), pages 409-434, December.
    10. Mariem Talbi & Amel Ben Halima, 2019. "Global Contagion of Investor Sentiment during the US Subprime Crisis: The Case of the USA and the Region of Latin America," International Journal of Economics and Financial Issues, Econjournals, vol. 9(3), pages 163-174.
    11. Marie‐Helene Gagnon & Celine Gimet, 2020. "Unconventional economic policies and sentiment: An international assessment," The World Economy, Wiley Blackwell, vol. 43(6), pages 1544-1591, June.
    12. Shah, Syed Faisal & Albaity, Mohamed, 2022. "The role of trust, investor sentiment, and uncertainty on bank stock return performance: Evidence from the MENA region," The Journal of Economic Asymmetries, Elsevier, vol. 26(C).
    13. Szymon Lis, 2022. "Investor Sentiment in Asset Pricing Models: A Review," Working Papers 2022-14, Faculty of Economic Sciences, University of Warsaw.
    14. Rehman, Mobeen Ur & Sensoy, Ahmet & Eraslan, Veysel & Shahzad, Syed Jawad Hussain & Vo, Xuan Vinh, 2021. "Sensitivity of US equity returns to economic policy uncertainty and investor sentiments," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).
    15. Wu, Qinqin & Hao, Ying & Lu, Jing, 2017. "Investor sentiment, idiosyncratic risk, and mispricing of American Depository Receipt," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 51(C), pages 1-14.
    16. Pedro Manuel Nogueira Reis & Carlos Pinho, 2021. "A Reappraisal of the Causal Relationship between Sentiment Proxies and Stock Returns," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 22(4), pages 420-442, October.
    17. Nyman, Rickard & Kapadia, Sujit & Tuckett, David, 2021. "News and narratives in financial systems: Exploiting big data for systemic risk assessment," Journal of Economic Dynamics and Control, Elsevier, vol. 127(C).
    18. Keunbae Ahn, 2021. "Predictable Fluctuations in the Cross-Section and Time-Series of Asset Prices," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 1-2021, January-A.
    19. Jasman Tuyon & Zamri Ahmad & Hylmee Matahir, 2016. "The Roles of Investor Sentiment in Malaysian Stock Market," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 12(Suppl. 1), pages 43-75.
    20. Dimitris Anastasiou & Apostolos Katsafados, 2023. "Bank deposits and textual sentiment: When an European Central Bank president's speech is not just a speech," Manchester School, University of Manchester, vol. 91(1), pages 55-87, January.

    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:eee:transe:v:155:y:2021:i:c:s1366554521002520. 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/600244/description#description .

    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.