A co-integration approach to forecasting freight rates in the dry bulk shipping sector |
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Authors: | Albert Willem Veenstra Philip Hans Franses |
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Affiliation: | Department of Regional Transport and Port Economics, Erasmus University, Rotterdam, The Netherlands;Department of Econometrics and Rotterdam Institute for Business Economics Studies, Erasmus University, Rotterdam, The Netherlands |
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Abstract: | In this paper, a vector autoregressive model is developed for a sample of ocean dry bulk freight rates. Although the series of freight rates are themselves found to be non-stationary, thus precluding the use of many modelling methodologies, evidence provided by cointegration tests points to the existence of stable long-term relationships between the series. An assessment of the forecasts derived from the model suggests that the specification of these long-term relationships does not improve the accuracy of short- or long-term forecasts. These results are interpreted as a corroboration of the efficient market hypothesis. |
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