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Dynamic earnings within tanker markets: An investigation of exogenous and endogenous structure breaks

Abouarghoub, Wessam, Mariscal, Iris and Howells, Peter 2012. Dynamic earnings within tanker markets: An investigation of exogenous and endogenous structure breaks. American International Journal of Contemporary Research 2 (1) , pp. 132-147.

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This study examines the possibility of tanker spot freight rates being state dependent and whether structure breaks are exogenous or endogenous. Thus, structure-break tests and a multi-state Markov-switching regime framework are implemented. Furthermore, conditional stationarity of tanker freight rates is investigated. In general empirical maritime literature suggest, non-stationary of freight price-levels, contrast to maritime theory, which implies that in perfect competitive conditions, freight rates revert to a long-run mean. Working from the postulate that freight earnings switch between two distinct states, a high volatility state and a low volatility state, we propose a multi-state Markov-switching regime framework. The inclusion of addition states is to identify structure-breaks and shifts in tanker earnings and volatilities levels. Empirical findings are aligned with maritime economic theory, in regards to freights being mean reverting and stationary. Furthermore, there is clear evidence of s ignificant shifts in freight dynamics for the tanker market and that tanker freight rates are state dependent, influenced by endogenous and exogenous shocks.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HD Industries. Land use. Labor
Publisher: Centre for Promoting Ideas
ISSN: 2162-139X
Date of First Compliant Deposit: 30 March 2016
Last Modified: 20 Oct 2017 12:29

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