Understanding the variance of earnings growth: The case of shipping

Hyun-Tak Lee and Heesung Yun

Journal of Commodity Markets, 2024, vol. 35, issue C

Abstract: This study examines the relationship between the unexpected changes in earnings and the shipping market movements. The econometric method of variance decomposition proposed by Campbell (1991) is employed to empirically analyze the Panamax and Capesize markets. We find that a large proportion of unexpected earnings growth is related to news about returns that indicate subsequent price changes. The results provide important insights to practice for sustaining shipping businesses, which helps shipping companies make better investment and risk-management decisions. The contribution of this research is to deepen the understanding of the interaction between shocks to earnings growth, returns, and price–charter ratios in the present-value context.

Keywords: Shipping market; Variance decomposition; Present-value framework; Earnings growth; Price–charter ratio (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocoma:v:35:y:2024:i:c:s2405851324000394

DOI: 10.1016/j.jcomm.2024.100420

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