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Dynamic interrelationships in returns and volatilities between Capesize and Panamax markets

Shun Chen, Hilde Meersman and Eddy van de Voorde
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Shun Chen: Department of Maritime Technology and Transportation, Delft University of Technology, Delft, the Netherlands
Eddy van de Voorde: Department of Transport and Regional Economics, University of Antwerp, Antwerp, Belgium. E-mails:;

Maritime Economics & Logistics, 2010, vol. 12, issue 1, 65-90

Abstract: This article investigates the interrelationships in daily returns and volatilities between Capesize and Panamax price series in four major trading routes, the transatlantic, the fronthaul, the transpacific and the backhaul, during the sample period from 1999 to 2008. The sample is split into two sub-periods: the first runs from 3 January 1999 to 24 December 2002 and the second is from 2 January 2003 to 29 August 2008, because of the substantially different economic conditions and market features over each of these periods. Cointegration and causality tests have been made for the price series over two sub-periods and yield mixed results. The volatility spillovers between Capesize and Panamax markets are investigated by employing an extended bivariate ECM-GARCH model. The results, in terms of returns and volatilities, imply that the dynamics between the two markets change across time on different trading routes. The findings of this study contain useful information for both shipowners and charterers to mitigate risks or to make extra profits by switching between the two markets.

Date: 2010
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