Title: An analytical study on the likely causes of the minor bubbles in the Baltic dry index

Authors: Abdullah Açık; Sadık Özlen Başer

Addresses: Department of Maritime Business Administration, Maritime Faculty, Dokuz Eylül University, Buca, İzmir, Turkey ' Department of Maritime Business Administration, Maritime Faculty, Dokuz Eylül University, Buca, İzmir, Turkey

Abstract: The imbalances between supply and demand in the maritime market bring about long-run and short-run cyclicality in the freight rates. In the long-run, the equilibrium mechanism lasts for many years, and in the short-run, small deviations occur due to the effects of sudden shocks. Those in the positive direction of these deviations cause minor bubbles at freight rates. The aim of this study is to contribute to the existing maritime economics literature by empirically identifying these minor bubble dates, analysing the events corresponding to those days, and revealing the factors that cause bubble formation in the dry bulk market. In this direction, firstly the price bubbles in the Baltic dry index (BDI) have been determined by generalised sup augmented Dickey-Fuller (GSADF) test. Then the market reports corresponding to these bubble dates have been analysed, and the events which might boost freight rates have been detected. The results of the analysis reveals that, these events could be categorised such eight factors as climatic factors, cultural factors, political factors, voyage factors, operational factors, production factors, adjacent market factors and sentiment factors.

Keywords: freight rates; price bubbles; Baltic dry index; BDI; generalised sup augmented Dickey-Fuller; GSADF.

DOI: 10.1504/IJLEG.2018.097478

International Journal of Logistics Economics and Globalisation, 2018 Vol.7 No.4, pp.353 - 365

Received: 17 Sep 2018
Accepted: 10 Oct 2018

Published online: 18 Jan 2019 *

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