English, Article edition: Are Spot Freight Rates Stationary? Steen Koekebakker; Roar Adland; Sigbjørn Sødal

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Bookmark: http://trove.nla.gov.au/version/33128
Physical Description
  • article
Language
  • English

Edition details

Title
  • Are Spot Freight Rates Stationary?
Author
  • Steen Koekebakker
  • Roar Adland
  • Sigbjørn Sødal
Physical Description
  • article
Notes
  • 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
  • RePEc:tpe:jtecpo:v:40:y:2006:i:3:p:449-472
Language
  • English
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