Volatility Forecasting Across Tanker Freight Rates: The Role of Oil Price Shocks

35 Pages Posted: 27 Feb 2019

See all articles by Konstantinos Gavriilidis

Konstantinos Gavriilidis

University of Stirling

Dimos S Kambouroudis

University of Stirling - Department of Accounting and Finance

Katerina Tsakou

Swansea University

Dimitris A. Tsouknidis

Athens University of Economics and Business

Date Written: July 1, 2018

Abstract

This paper examines whether the inclusion of oil price shocks of different origin as exogenous variables in a wide set of GARCH-X models improves the accuracy of their volatility forecasts for spot and 1-year time-charter tanker freight rates. Kilian’s (2009) oil price shocks of different origin enter GARCH-X models which, among other stylized facts of the tanker freight rates examined, take into account the presence of asymmetric and long-memory effects. The results reveal that the inclusion of aggregate oil demand and oil-specific (precautionary) demand shocks improves significantly the accuracy of the volatility forecasts drawn.

Keywords: Volatility Forecasts, Tanker Freight Rates, Oil Price Shocks, GARCH-X Models

JEL Classification: G11, G12, G13, G14

Suggested Citation

Gavriilidis, Konstantinos and Kambouroudis, Dimos S and Tsakou, Katerina and Tsouknidis, Dimitris A., Volatility Forecasting Across Tanker Freight Rates: The Role of Oil Price Shocks (July 1, 2018). Available at SSRN: https://ssrn.com/abstract=3332262 or http://dx.doi.org/10.2139/ssrn.3332262

Konstantinos Gavriilidis

University of Stirling ( email )

Stirling, Scotland FK9 4LA
United Kingdom

Dimos S Kambouroudis

University of Stirling - Department of Accounting and Finance ( email )

Stirling, Scotland FK9 4LA
United Kingdom

Katerina Tsakou

Swansea University ( email )

Singleton Park
Swansea, Wales SA2 8PP
United Kingdom

Dimitris A. Tsouknidis (Contact Author)

Athens University of Economics and Business ( email )

76 Patission Street
GR-104 34 Athens
Greece

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