Econometric Analysis of Bulk Shipping: implications for investment strategies and financial decision-making

Abstract

This thesis provides an econometric analysis of the bulk shipping markets and the implications for shipping investment and financial decision making. \nChapter 1 sets the scene by providing a historic analysis of bulk shipping markets over the last 55 years. From this analysis, four shipping markets (freight, newbuilding, second-hand and demolition) are distinguished as well as a fifth one (ship finance) that acts as a facilitator to the other four. Also, with the help of correlation analysis, the factors influencing these markets are identified. The chapter then considers five critical interdependent forces (economic structure, ship supply and demand capital flows expressed by investor preferences and investment performance) that comprise the shipping market and move in cyclical patterns. This way, the chapter explains the role of the shipping cycle in devising investment strategies. Based on this analysis, Chapter 1 ends by defining the thesis aim and objectives. \nChapter 2 presents the thesis methodology. It critically analyses the methods used in the collection of data and the interpretation of it, as well as the problems experienced while collecting it. \nThe four subsequent chapters present the results from the analysis of the four shipping markets (freight, newbuilding, second-hand and demolition). Based on theory, Error Correction Models describing and quantifying the relationships between the variables are developed for all four markets. This way the thesis fills a gap in maritime economics literature by estimating models where none of the CLRM assumptions are violated. Consequently, statistical inferences from these models can be made safely. Furthermore, by disaggregating into the different ship types according to size, the thesis finds that different variables have different effects on each type, thus proving that each ship type has its own distinctive characteristics. Finally, chapters 4 to 7 compare different econometric methods, the theoretical Error Correction and the atheoretical family of Auto Regressive Moving Average (ARMA) models.

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