An empirical analysis of structural breaks in world dry bulk shipping market Online publication date: Thu, 26-Jan-2023
by Lei Dai; Danyue Jing; Hao Hu; Yifan Shi; Seungwon Lee
International Journal of Shipping and Transport Logistics (IJSTL), Vol. 16, No. 1/2, 2023
Abstract: Dry bulk shipping is an important element of international trade. However, as dry bulk shipping market is always influenced by unanticipated economic, financial or political events, structural breaks exist in vessel price volatility, while the price volatility characteristics under structural breaks have not been well identified. This paper aims to investigate the vessel price volatility under structural breaks caused by external events. The modified ICSS algorithm is applied to detect the structural break points and GARCH model incorporating structural breaks is used to examine the volatility of newbuilding and second-hand vessel prices of four dry bulk vessel types using monthly data from January 2002 to November 2012. Results show that the price volatility's persistence effect and clustering effect decrease when structural breaks in variance are accounted. The findings may contribute to the literature in vessel price volatility modelling under structural breaks and may be helpful for practitioners.
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