Buy Together, but Recycle Alone: Sentiment-Driven Herding Behavior in Oceanic Dry Bulk Shipping

24 Pages Posted: 8 Jan 2021

See all articles by Konstantinos D. Melas

Konstantinos D. Melas

Metropolitan College, Greece - Faculty of Business and Economics

Nektarios Michail

Cyprus University of Technology

Date Written: September 7, 2020

Abstract

We employ the vessels that comprise the dry bulk segment of the maritime industry and examine how market sentiment affects the herding behavior of shipping investors in a real asset market. Our results show that the behavioral aspect of investing, measured through intentional and unintentional herding, contrary to the results for financial markets, is affected by sentiment on the buy side (newbuildings) but not on the sell side (scrapping). Furthermore, we provide evidence that when market sentiment is negative, investors tend to follow market leaders (intentional herding), while, when sentiment is positive, unintentional herding leads to common investment practices among shipping investors. Our results have significant implications both for academics and for practitioners since they reflect a clear distinction of the pattern of investment decisions for real assets, compared to financial assets.

Keywords: shipping markets, dry bulk, real assets, sentiment, herding behavior, threshold regression

JEL Classification: G11, G12, G13, G20

Suggested Citation

Melas, Konstantinos and Michail, Nektarios, Buy Together, but Recycle Alone: Sentiment-Driven Herding Behavior in Oceanic Dry Bulk Shipping (September 7, 2020). Available at SSRN: https://ssrn.com/abstract=3687998

Konstantinos Melas (Contact Author)

Metropolitan College, Greece - Faculty of Business and Economics ( email )

74, Sorou St.
Maroussi, 15125
Greece

Nektarios Michail

Cyprus University of Technology ( email )

Limassol, 3603
Cyprus

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