Return lead-lag and volatility transmission in shipping freight markets
Yao-Jen Hsiao,
Heng-Chih Chou and
Chun-Chou Wu
Maritime Policy & Management, 2014, vol. 41, issue 7, 697-714
Abstract:
This study investigates the return lead - lag and volatility transmission between dry bulk shipping and container shipping freight markets over the period before, during and after the 2008 financial tsunami. Both cointegration analysis and the Granger causality test are applied to explore the lead - lag relationship between the Baltic dry index (BDI) and the China containerized freight index (CCFI). Besides, in the study we employed GARCH-BEKK model, which allows for transmission in freight volatility. On the whole, the empirical results show that the BDI reflects the economic climate earlier than the CCFI during the financial tsunami, whereas the CCFI leads the BDI after the financial tsunami. The price formation hypothesis could well explain the relationship. Moreover, volatility spillovers are found in most subperiods. The dynamics of the conditional volatilities differ, but causality links in the variance are found to be strong and bidirectional in normal periods, and unidirectional during the financial tsunami. Therefore, the occurrence of the financial tsunami could be regarded as an interference factor.
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:taf:marpmg:v:41:y:2014:i:7:p:697-714
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DOI: 10.1080/03088839.2013.865849
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