Economic and Financial Risk Factors and Tanker Shipping Stock Returns
28 Pages Posted: 13 Mar 2007 Last revised: 14 Sep 2008
Date Written: January 1, 2007
In this paper we identify a range of economical and financial risk factors and analyse their empirical impacts on tanker shipping stock returns, using an OLS-regression. Earlier shipping-related studies have concentrated on shipping stock returns in general and the differences between shipping segments with regards to market βs. However, shipping segments are highly specialised, leading to great differences in the sources of risk. Further segment-specific studies are therefore valuable. This paper concentrates on the sources of risk in the tanker segment. All factors are identified with regards to a demand and supply model of tanker shipping. The factors are argued to be the changes in the following: The world return, industrial production, USD exchange rate, the oil price, US crude oil inventories, US crude runs and the size of the tanker fleet. Of these, the world return and the USD exchange rate were found to be positively correlated with the returns of a value-weighted tanker stock portfolio. Crude oil inventories and crude runs are negatively correlated, while changes in world production, oil price and tanker fleet size are insignificant in explaining tanker stock returns.
Keywords: Tanker shipping, stock returns, fleet size, freight rates
JEL Classification: C01, C22, E44, F20, G00
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