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

Listed author(s):
  • 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)

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

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Article provided by Palgrave Macmillan & International Association of Maritime Economists (IAME) in its journal Maritime Economics & Logistics.

Volume (Year): 8 (2006)
Issue (Month): 3 (September)
Pages: 223-233

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Handle: RePEc:pal:marecl:v:8:y:2006:i:3:p:223-233
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