Dynamic interrelationships in returns and volatilities among shipping freight markets

This paper explores and analyzes the return lead-lag relationships and volatility transmission among dry bulk, container and tanker shipping freight market after the financial crisis in 2008. However, there are few numbers of studies that investigates such interactions between shipping freight markets, but no studies that also consider potential linkage between container and tanker freight market. This study fills the gap by examining lead-lag and volatility spillover effects among these three shipping freight markets. The Granger causality test and the co-integration analysis are applied to investigate the lead-lag relationship among the Baltic dry index (BDI), Shanghai (export) containerized freight index (SCFI), and the Baltic dirty tanker index (BDTI). Besides, the multivariate Further, the impulse response and variance decomposition method are employed to analyze the response of freight market to the shocks coming from other freight markets. The GARCH-BEKK model is employed to examine transmission effects in freight volatility. On the whole, the empirical results show that there is no lead-lag relationship among shipping freight markets after the financial tsunami in long run. However, these freight markets show positive reaction to own shocks in the short-run. The dry bulk market also respond to shocks coming from the container and tanker freight markets, whereas there is no response in the container market from other two shipping freight markets in the short-run. In addition, the tanker freight market show positive response to impulse coming from dry bulk market but no response to shocks coming from the container freight market. Moreover, there is mutual volatility transmission between dry bulk and container freight markets only. The findings of this study contain useful information about volatility spillovers for maritime players and help them in planning for portfolio diversification, hedging strategies, and forecasting freight rates