Time series analysis of the lead-lag relationship of freight futures and spot market prices

This thesis analyzes the relationship between the physical and paper shipping markets. The main objective is to find if one market leads the other by a specific time period so that market players can take advantage from that. Three different methods were used to analyze this relationship. The first is a rolling average technique to smooth the strong fluctuations of the market and plot the relevant graphs. From there we can have a first look on whether there is a lead-lag relationship between the two markets. The second method was the cross-correlation function which allows us to time shift back and forth the two time series in order to compare the relevant correlation coefficients. In the third method, a Vector Error Correction model was created for each pair of time series in order to test the influence of the one series to the other. Finally, we present a brief comparison between the volatility of the freight rates and the trading value of freight futures so we can judge if the spot market became more volatile with the growth of trading of freight futures.

Department dc:contributor.department

Massachusetts Institute of Technology. Dept. of Mechanical Engineering.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2008

Author dc:creator

• Gavriilidis, Nikolaos

Advisor dc:contributor.advisor

• Henry S. Marcus.

• Mechanical Engineering.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/46067

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/46067