Economic Spillovers Between Related Derivatives Markets: The Case of Commodity and Shipping Markets

摘要

The investigation of the degree and the way that new information is transmitted between different markets has always been of interest in the financial literature. Most of the previous studies investigate volatility spillover effects between spot markets of the same asset class or between derivatives and their underlying spot markets. This study investigates the return and volatility spillover effects between freight forward markets and commodity futures markets of commodities transported by ocean going vessels. Results, which are uncovered for the first time to such extent and for several different freight derivatives markets, show that there are spillover relationships of high significance between the derivatives markets. The signaling role of such interrelations is of great economic value to market participants engaged in these markets, as it enables them to construct investment and hedging strategies and to understand how information is transferred between these markets.