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Asymmetric volatility varies in different dry bulk freight rate markets under structure breaks

Junlin Liu and Feier Chen

Physica A: Statistical Mechanics and its Applications, 2018, vol. 505, issue C, 316-327

Abstract: The past decade has experienced the historical boom and recession in the dry bulk shipping market, which is extremely volatile and more complex than ever before. The asymmetric correlations analysis within the shipping market can provide an understanding of the asymmetric features of risk, which would be helpful for portfolio diversification and risk management. This paper investigates the asymmetric volatility characteristics in dry bulk freight market during the 2008 world financial crisis, which may impose significant impacts on the mechanism of market volatility. First, we apply multiple structural change model to detect the breaking points. Then an improved A-MF-DFA (Asymmetric Multifractal Detrended Fluctuation Analysis) model is applied to capture the asymmetric volatility of the dry bulk shipping market brought by the financial crisis. The empirical results suggest that the financial shocks on the market have a different magnitude of influence on volatility of different vessel types, and the breaking point positions also varies. The positions and scales of the switching points (SPs) of the fluctuation trend detected from A-MF-DFA method also suggest highly asymmetric characteristics in the indices. These findings supply new perspectives for investors in understanding the underlying market risks, crisis effects on bulk shipping market and detailed volatility characters for specific vessel types.

Keywords: Volatility; Bulk shipping market; Multiple structure break; A-MF-DFA; Asymmetric analysis; Switching point (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:phsmap:v:505:y:2018:i:c:p:316-327