The non-linear dynamics of spot freight rates in tanker markets

Roar Adland and Kevin Cullinane

Transportation Research Part E: Logistics and Transportation Review, 2006, vol. 42, issue 3, 211-224

Abstract: The purpose of this paper is to investigate the dynamics of the freight rate in the oil transportation markets using a general non-parametric Markov diffusion model. The empirical results suggest that the dynamics of the spot freight rate in the oil transportation market can best be described by a non-linear stochastic model. We show that the spot freight rate is mean reverting only in the extremes of the empirical range and that the volatility of the freight rate changes increases with the level of the freight rate. The former result, which implies that the spot freight rate process behaves like a Martingale over most of its empirical range, can explain why non-stationarity is difficult to reject over short samples, yet the spot freight rate process is globally mean reverting as implied by maritime economic theory.

Keywords: Tanker; markets; Freight; rates; Non-linear; dynamics; Oil; tranportation; Markov; Mean; reversion (search for similar items in EconPapers)
Date: 2006
References: Add references at CitEc
Citations: View citations in EconPapers (50)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1366554505000025
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:transe:v:42:y:2006:i:3:p:211-224

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/journaldescription.cws_home/600244/bibliographic
http://www.elsevier. ... 600244/bibliographic

Access Statistics for this article

Transportation Research Part E: Logistics and Transportation Review is currently edited by W. Talley

More articles in Transportation Research Part E: Logistics and Transportation Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().