 Are Spot Freight Rates Stationary?Steen Koekebakker (), Roar Adland and Sigbjørn Sødal Journal of Transport Economics and Policy, 2006, vol. 40, issue 3, 449-472 Abstract: In the recent literature, empirical tests of stationarity of freight rates often conclude that spot freight rates are non-stationary processes. However, many maritime economists would argue that the freight rate cannot exhibit asymptotically explosive behaviour, as implied by non-stationarity, in a perfectly competitive freight market. This paper restates the theoretical arguments behind mean reversion and boundedness of the spot freight rate process and suggests that the failure to reject non-stationarity may be due to the weak power of the tests most frequently used. We employ a non-linear version of the Augmented Dickey-Fuller (ADF) test, based on an exponentially smooth-transition autoregressive model (ESTAR). This test enhances the power against mean-reverting nonlinear alternative hypotheses compared to the linear alternative for traditional ADF tests. Our empirical results show, in line with maritime economic theory, that freight rates in both dry-bulk and tanker markets are non-linear stationary. © 2006 LSE and the University of Bath Date: 2006 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:tpe:jtecpo:v:40:y:2006:i:3:p:449-472 Access Statistics for this article Journal of Transport Economics and Policy is currently edited by B T Bayliss, S A Morrison, A Smith and D Graham More articles in Journal of Transport Economics and Policy from University of Bath |
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