Seasonality Patterns in Tanker Shipping Freight Markets

Economic Modelling, Nov. 2002, Vol. 19, Issue 5, 747-782

Posted: 18 Feb 2014

See all articles by Amir H. Alizadeh

Amir H. Alizadeh

City University London - Sir John Cass Business School

Manolis G. Kavussanos

Athens University of Economics and Business - Department of Accounting and Finance

Date Written: 2002

Abstract

The aim of this paper is to investigate the existence and nature of seasonality (deterministic or stochastic) in tanker freight markets and measure and compare it across sub-sectors and under different market conditions (expansionary and contractionary) for the period January 1978 to December 1996. The existence of stochastic seasonality is rejected for all freight series while results on deterministic seasonality indicate increases in rates in November and December and decreases in rates from January to April. Seasonality is found to be varying across markets depending on vessel size and market condition. Seasonality comparisons under different market conditions, an issue investigated for the first time in the econometrics literature using Markov Switching models, reveal that seasonal rate movements are more pronounced when the market is recovering compared to smaller changes when the market is falling. This is well in line with the low and high elasticity of supply expected in expansionary and contractionary periods of shipping markets. The results have implications for tactical shipping operations such as budget planning, timing of dry-docking, vessel speed adjustments and repositioning. As expected, the out-of-sample forecasting performance of these Markov Regime Switching models is lacking somewhat, a result which is thought to be a consequence of having to predict ‘states’ simultaneously with mean values.

Keywords: Shipping; Seasonality; Tanker freight rates; Markov switching; Market conditions; Forecasting

JEL Classification: L91; L92; C22; C51; C53

Suggested Citation

Alizadeh, Amir H. and Kavussanos, Manolis G., Seasonality Patterns in Tanker Shipping Freight Markets (2002). Economic Modelling, Nov. 2002, Vol. 19, Issue 5, 747-782. Available at SSRN: https://ssrn.com/abstract=1435288

Amir H. Alizadeh

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Manolis G. Kavussanos (Contact Author)

Athens University of Economics and Business - Department of Accounting and Finance ( email )

76 Patission St
TK 104 34 Athens
Greece
0030 210 8203167 (Phone)
0030 210 8228816 (Fax)

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