[go: up one dir, main page]

IDEAS home Printed from https://ideas.repec.org/p/uwe/wpaper/20131314.html
   My bibliography  Save this paper

A two-state Markov-switching distinctive conditional variance application for tanker freight returns

Author

Listed:
  • Wessam Abouarghoub

    (University of the West of England, Bristol)

  • Iris Biefang-Frisancho Mariscal

    (University of the West of England, Bristol)

  • Peter Howells

    (University of the West of England, Bristol)

Abstract
The few papers that explore different ways to measure shipping freight dynamics have differed in their interpretation of the most suitable measure for conditional freight volatility and consequently for the most appropriate freight risk measure. Furthermore, recent empirical work in maritime studies suggests the possibility of conditional freight volatility switching between different regime states that are dynamically distinct. This paper attributes these dissimilarities in findings within maritime literature to the possibility of freight returns switching between distinctive volatility structures. Therefore, it proposes a two-state Markov-switching distinctive conditional variance model by matching the two-state conditional freight variance to the most suitable GARCH specification. This provides for the first time a distinctive empirical insight into the dynamics of tanker freight rates by explaining the dissimilarities within the maritime literature in measuring freight risk that improves our understanding of the changes in volatility dynamics of the freight supply curve. Thus, this study postulates that the dynamics of freight rates are distinct and conditional on the freight volatility regime-state that prevails at the time. Empirical findings postulate that volatilities within tanker freight returns are better modelled by a framework that is capable of capturing volatility dynamics within the tanker freight market. This study attempts to explain the dissimilarities within the maritime literature in measuring freight risk by improving our understanding of the changes in volatility dynamics of the freight supply curve.

Suggested Citation

  • Wessam Abouarghoub & Iris Biefang-Frisancho Mariscal & Peter Howells, 2013. "A two-state Markov-switching distinctive conditional variance application for tanker freight returns," Working Papers 20131314, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
  • Handle: RePEc:uwe:wpaper:20131314
    as

    Download full text from publisher

    File URL: http://www2.uwe.ac.uk/faculties/BBS/BUS/Research/Economics13/1314.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Suzanne Fry & Felix Ritchie, 2012. "Issues in the measurement of low pay: 2010," Working Papers 20121210, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    2. Wessam M. T. Abouarghoub & Iris Biefang-Frisancho Mariscal, 2011. "Measuring level of risk exposure in tanker Shipping freight markets," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 1(1), pages 20-44, December.
    3. Gail Pacheco & De Wet van der Westhuizen & Don J. Webber, 2012. "The changing influence of culture on job satisfaction across Europe: 1981-2008," Working Papers 2012-06, Auckland University of Technology, Department of Economics.
    4. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Javier Población & Gregorio Serna, 2021. "Measuring bulk shipping prices risk," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 23(2), pages 291-309, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wessam M. T. Abouarghoub & Iris Biefang-Frisancho Mariscal, 2011. "Measuring level of risk exposure in tanker Shipping freight markets," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 1(1), pages 20-44, December.
    2. Iris Biefang-Frisancho Mariscal, 2013. "Risk-taking and monetary policy before the crisis: The case of Germany," Working Papers 20131308, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    3. Woon Wong & Iris Biefang-Frisancho Mariscal & Wanru Yao & Peter Howells, 2013. "Liquidity and credit risks in the UK’s financial crisis," Working Papers 20131301, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    4. Hilary Drew & Anna King & Ritchie Felix, 2014. "How do knowledge brokers work? The case of WERS," Working Papers 20141403, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    5. Wessam M. T. Abouarghoub & Iris Biefang-Frisancho Mariscal, 2011. "Measuring level of risk exposure in tanker Shipping freight markets," International Journal of Business and Social Research, LAR Center Press, vol. 1(1), pages 20-44, December.
    6. Peter Howells, 2013. "The US Fed and the Bank of England: Ownership, structure and 'independence'," Working Papers 20131311, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    7. Milan Kumar Das & Anindya Goswami, 2019. "Testing of binary regime switching models using squeeze duration analysis," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 6(01), pages 1-20, March.
    8. Carstensen, Kai & Heinrich, Markus & Reif, Magnus & Wolters, Maik H., 2020. "Predicting ordinary and severe recessions with a three-state Markov-switching dynamic factor model," International Journal of Forecasting, Elsevier, vol. 36(3), pages 829-850.
    9. David Andolfatto & Paul Gomme, 2003. "Monetary Policy Regimes and Beliefs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(1), pages 1-30, February.
    10. Hendry, David F. & Clements, Michael P., 2003. "Economic forecasting: some lessons from recent research," Economic Modelling, Elsevier, vol. 20(2), pages 301-329, March.
    11. Perron, Pierre & Wada, Tatsuma, 2016. "Measuring business cycles with structural breaks and outliers: Applications to international data," Research in Economics, Elsevier, vol. 70(2), pages 281-303.
    12. Nemati, Mehdi & Saghaian, Sayed H., 2016. "Dynamics of Price Adjustment in Qualitatively Differentiated Markets in the U.S.: The Case of Organic and Conventional Apples," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 229950, Southern Agricultural Economics Association.
    13. Flavin, Thomas J. & Panopoulou, Ekaterini & Unalmis, Deren, 2008. "On the stability of domestic financial market linkages in the presence of time-varying volatility," Emerging Markets Review, Elsevier, vol. 9(4), pages 280-301, December.
    14. Shyh-Wei Chen, 2008. "Non-stationarity and Non-linearity in Stock Prices: Evidence from the OECD Countries," Economics Bulletin, AccessEcon, vol. 3(11), pages 1-11.
    15. David Bolder & Shudan Liu, 2007. "Examining Simple Joint Macroeconomic and Term-Structure Models: A Practitioner's Perspective," Staff Working Papers 07-49, Bank of Canada.
    16. Candelon, Bertrand & Lieb, Lenard, 2013. "Fiscal policy in good and bad times," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2679-2694.
    17. Francesco Bianchi, 2013. "Regime Switches, Agents' Beliefs, and Post-World War II U.S. Macroeconomic Dynamics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(2), pages 463-490.
    18. Saki Bigio & Eduardo Zilberman, 2020. "Speculation-Driven Business Cycles," Working Papers Central Bank of Chile 865, Central Bank of Chile.
    19. René Garcia & Richard Luger & Eric Renault, 2000. "Asymmetric Smiles, Leverage Effects and Structural Parameters," Working Papers 2000-57, Center for Research in Economics and Statistics.
    20. Muñoz, Mª Pilar & Márquez, María Dolores & Sánchez, Josep A., 2011. "Contagion between United States and european markets during the recent crises," MPRA Paper 35993, University Library of Munich, Germany.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uwe:wpaper:20131314. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jo Michell (email available below). General contact details of provider: https://edirc.repec.org/data/seuweuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.