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Panamax markets behaviour: explaining volatility and expectations

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  • Karaoulanis, Ioannis
  • Pelagidis, Theodore

Abstract

It is widely accepted that the highly volatile Panamax market has many peculiarities; for example, Panamax vessels transport the major and the minor dry bulk cargoes worldwide. In contrast, the variety of cargoes and the flexibility in various trade routes, which the Panamax vessels follow, create a broad market with a relatively open structure. The importance of the Panamax market has also been highlighted by a recently upgraded contribution of the Baltic Panamax Index (BPI) to the Baltic Dry Index (BDI), affecting the progress of the BDI significantly. This paper investigates the behaviour of the Panamax market focusing on expectations and time lags. Expectations play a critical role in the freight market both for short-term and long-term decision making. In particular, we investigate the relationship between time lags and time-charter, trip and spot market rates, and the average earnings of the Panamax vessels of various ages. Time series analysis is used to reach our conclusions. The Hannan–Quinn criterion has been selected to identify the Panamax freight market’s significant lags for 1989–2020. An autoregressive model (AR) has been constructed to perform the statistical analysis. The findings indicate a strong correlation between time lags and the Panamax freight market, forecasting the behaviour of the market indeed. A better understanding of the Panamax market’s behaviour can improve shipowners and charterers’ planning decisions practically.

Suggested Citation

  • Karaoulanis, Ioannis & Pelagidis, Theodore, 2021. "Panamax markets behaviour: explaining volatility and expectations," MPRA Paper 110749, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:110749
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    More about this item

    Keywords

    Panamax Markets; 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
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Z0 - Other Special Topics - - General

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