An Investigation of the Volatility of Time Charter Markets

Abstract

We aim to measure and conduct an analysis of volatility on the representative class of vessels from 2002 to the end of 2007. For the corresponding period of time, Clarkson’s weekly data on T/C rates are employed during the research for seven different types of ships on five different duration types. We conclude that “soft optimism” over the state of the shipping industry still exists but the instability in financial markets is not yet over. Although the volatility in general has not increased at all, there is a really big difference in the change of the successive volatility levels for different segments of the TC markets. Furthermore, in the near future with the new different deliveries for each GRT size of vessels, not only the volatility for each segment seems to change dramatically, but also do the freight rates and TC rates. The prices for all segments in the shipping market would not follow the same pattern. Thus, we should be ready to observe different movements in different shipping market segments’ rates in near future.

Keywords: maritime markets, time charter rates, volatility

JEL Classification: L16, L91, E32