Market Interaction in Returns and Volatilities between Spot and Forward Shipping Freight Markets

Posted: 18 Feb 2014

See all articles by Ilias Visvikis

Ilias Visvikis

Independent

Manolis G. Kavussanos

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

Date Written: 2004

Abstract

The lead-lag relationship in both returns and volatilities between spot and futures markets has been investigated extensively in the financial economics literature. Only a limited number of such studies have appeared on forward markets, primarily due to the lack of easy access to empirical data. This paper uses a unique database in over-the-counter Forward Freight Agreements (FFA) to investigate the issue. The underlying commodity is non-storable, being that of a shipping service, with the additional feature of transactions costs being higher in the spot market in comparison to the forward market. These features have interesting implications for the markets. At the practical level, the better understanding of the mean and variance dynamics can improve risk management and budget planning decisions. 2003 Elsevier B.V. All rights reserved.

Keywords: Price discovery; Futures and forward markets; Granger causality; VECM-GARCH; Volatility

JEL Classification: G13; G14; C32

Suggested Citation

Visvikis, Ilias and Kavussanos, Manolis G., Market Interaction in Returns and Volatilities between Spot and Forward Shipping Freight Markets (2004). Journal of Banking and Finance, Vol. 28, No. 8, 2004 pp. 2015-2049. Available at SSRN: https://ssrn.com/abstract=1435317

Ilias Visvikis

Independent ( email )

No Address Available

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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