Buy Together, but Recycle Alone: Sentiment-Driven Herding Behavior in Oceanic Dry Bulk Shipping

Abstract

We employ the vessels that comprise the dry bulk segment of the maritime industry and examine how market sentiment affects the herding behavior of shipping investors in a real asset market. Our results show that the behavioral aspect of investing, measured through intentional and unintentional herding, contrary to the results for financial markets, is affected by sentiment on the buy side (newbuildings) but not on the sell side (scrapping). Furthermore, we provide evidence that when market sentiment is negative, investors tend to follow market leaders (intentional herding), while, when sentiment is positive, unintentional herding leads to common investment practices among shipping investors. Our results have significant implications both for academics and for practitioners since they reflect a clear distinction of the pattern of investment decisions for real assets, compared to financial assets.

Keywords: shipping markets, dry bulk, real assets, sentiment, herding behavior, threshold regression

JEL Classification: G11, G12, G13, G20