Efficient pricing of ships in the dry bulk sector of the shipping industry

Manolis Kavussanos () and Amir H. Alizadeh

Maritime Policy & Management, 2002, vol. 29, issue 3, 303-330

Abstract: The aim of this paper was to investigate the validity of the Efficient Market Hypothesis in conjunction with Rational Expectations in the formation of dry bulk ship prices over the period January 1976-December 1997. Tests for market efficiency include those of orthogonality and unpredictability of excess returns on investments and tests based on the Vector Autoregressive models proposed by Campbell and Shiller. The latter methodology is extended further to a 3-variable Vector Autoregressive model, which is applicable to real assets with limited economic life. Results indicate that prices for newbuilding and second-hand vessels are not determined efficiently in the sense of Fama. Failure of the Efficient Market Hypothesis in the formation of ship prices is explained by the existence of timevarying risk premia, which relate excess returns to investors' perceptions of risk. These are modelled through the Generalized Autoregressive Conditional Heteroscedasticity in mean (GARCH-M) models. The results have important implications for shipping investment strategies, both in the newbuilding and second-hand markets.

Date: 2002
References: Add references at CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
http://hdl.handle.net/10.1080/03088830210132588 (text/html)
Access to full text is restricted to subscribers.

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:taf:marpmg:v:29:y:2002:i:3:p:303-330

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/TMPM20

DOI: 10.1080/03088830210132588

Access Statistics for this article

Maritime Policy & Management is currently edited by Dr Kevin Li and Heather Leggate McLaughlin

More articles in Maritime Policy & Management from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().