Economic information transmissions and liquidity between shipping markets: new evidence from freight derivatives

Alexandridis, G., Visvikis, I. and Sahoo, S. (2017) Economic information transmissions and liquidity between shipping markets: new evidence from freight derivatives. Transportation Research Part E: Logistics and Transportation Review, 98. pp. 82-104. ISSN 1366-5545 doi: 10.1016/j.tre.2016.12.007

Abstract/Summary

Economic return and volatility spillovers of derivatives markets on a number of assets have been extensively examined in the general economics literature. However, there are only a limited number of studies that investigate such interactions between freight rates and the freight futures, and no studies that also consider potential linkages with freight options. This study fills this gap by investigating the economic spillovers between time-charter rates, freight futures and freight options prices in the dry-bulk sector of the international shipping industry. Empirical results indicate the existence of significant information transmission in both returns and volatilities between the three related markets, which we attribute to varying trading activity and market liquidity. The results also point out that, consistent with theory, the freight futures market informationally leads the freight rate market, though surprisingly, freight options lag behind both futures and physical freight rates. The documented three-way economic interactions between the related markets can be used to enhance budget planning and risk management strategies, potentially attract more investors, and thus, improve the liquidity of the freight derivatives market.

Additional Information	This should be a restricted copy for now until further notice from the journal
Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/68324
Identification Number/DOI	10.1016/j.tre.2016.12.007
Refereed	Yes
Divisions	Henley Business School > Finance and Accounting
Additional Information	This should be a restricted copy for now until further notice from the journal
Publisher	Elsevier
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