The dynamics between newbuilding ship price volatility and freight volatility in dry bulk shipping market

摘要

Dry bulk shipping is a major component of the international trade. As the newbuilding shipprices fluctuate drastically, it is crucial to seek the major determinants that affect the pricefluctuation. Next to it, this paper studies the relationship between newbuilding ship pricevolatility and freight volatility in the dry bulk shipping market. An abundance of research hasbeen done to verify the time-varying characteristics of ship price volatility. However fewhave focused on the relationship between newbuilding ship price volatility and freightvolatility. We have examined the newbuilding ship price volatility against the freight andother variables’ volatility. This paper uses a two-step model. The first step is the measurementof newbuilding price volatility through an ARCH model; the second is the analysis of therelationship between newbuilding price volatility and freight volatility though a GMMregression. The result from the two-step model specification confirms that newbuilding pricevolatility is time-varying. Furthermore, the results reveal that the freight volatility positivelyaffect the newbuilding price volatility slightly. The newbuilding price volatility is mainlyaffected by secondhand price volatility and exchange volatility. The results of the studycontribute in a general sense to understanding the risk involved in newbuilding ship market.