Liquidity Effects and FFA Returns in the International Shipping Derivatives Market

Alizadeh A., Kappou K., Tsouknidis D.A. and Visvikis I., 2015. Liquidity eff ects and FFA returns in the international shipping derivatives market. Transportation Research Part E: Logistics and Transportation Review 76, 58-75.

38 Pages Posted: 7 Aug 2015

See all articles by Amir H. Alizadeh

Amir H. Alizadeh

City University London - The Business School

Konstantina Kappou

University of Reading - ICMA Centre

Dimitris A. Tsouknidis

Athens University of Economics and Business

Ilias Visvikis

Department of Finance, School of Business Administration, American University of Sharjah

Date Written: February 2, 2015

Abstract

The study examines the impact of liquidity risk on freight derivatives returns. The Amihud liquidity ratio and bid-ask spreads are utilized to assess the existence of liquidity risk in the freight derivatives market. Other macroeconomic variables are used to control for market risk. Results indicate that liquidity risk is priced and both liquidity measures have a significant role in determining freight derivatives returns. Consistent with expectations, both liquidity measures are found to have positive and significant effects on the returns of freight derivatives. The results have important implications for modeling freight derivatives, and consequently, for trading and risk management purposes.

Keywords: Forward Freight Agreements, Liquidity risk, Bid-ask spreads, Shipping, Panel data.

JEL Classification: G12, G13, G14, C23

Suggested Citation

Alizadeh, Amir H. and Kappou, Konstantina and Tsouknidis, Dimitris A. and Visvikis, Ilias, Liquidity Effects and FFA Returns in the International Shipping Derivatives Market (February 2, 2015). Alizadeh A., Kappou K., Tsouknidis D.A. and Visvikis I., 2015. Liquidity eff ects and FFA returns in the international shipping derivatives market. Transportation Research Part E: Logistics and Transportation Review 76, 58-75., Available at SSRN: https://ssrn.com/abstract=2640596

Amir H. Alizadeh

City University London - The Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Konstantina Kappou

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom
+44 7793405682 (Phone)
+44 1189314741 (Fax)

Dimitris A. Tsouknidis (Contact Author)

Athens University of Economics and Business ( email )

76 Patission Street
GR-104 34 Athens
Greece

Ilias Visvikis

Department of Finance, School of Business Administration, American University of Sharjah ( email )

P.O. Box 26666
Sharjah
United Arab Emirates
+97165154717 (Phone)

HOME PAGE: http://https://www.aus.edu/faculty/dr-ilias-visvikis

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