Skip to main content
SpringerLink
Log in

Information linkages between Panamax freight derivatives and commodity derivatives markets

  • Original Article
  • Published:
Maritime Economics & Logistics Aims and scope

Abstract

Cross market linkages and spillover effects between Forward Freight Agreements (FFAs) and futures contracts on the commodities transported by Panamax vessels can aid decision making in the very volatile freight markets. Results indicate that there are significant spillover effects between freight and commodity derivatives markets. These relationships run stronger from the commodity futures markets to forward freight markets. Following these results, market participants may monitor changes in the futures markets of the commodities transported by Panamax vessels to enhance their decisions in FFA and spot markets.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. In this article, wheat, corn and coal futures, which correspond to the underlying commodities transported in the shipping routes of the dry-bulk Panamax FFA contracts, are shown in the literature to fulfill their price discovery function; see, for instance, Aulton et al (1997) for UK wheat futures prices, Yang and Leatham (1999) for US wheat commodity futures markets and McKenzie and Holt (2002) for US corn futures, among others.

  2. The B and C matrices are restricted to be diagonal because this results in a more parsimonious representation of the conditional variance (see Bollerslev et al, 1994).

References

  • Akaike, H. (1974) A new look at the statistical model identification. IEEE Transactions on Automatic Control 9: 716–723.

  • Aulton, A., Ennew, C. and Rauner, J. (1997) Efficiency tests of futures markets for UK agricultural commodities. Journal of Agricultural Economics 48 (1–3): 408–424.

    Article  Google Scholar 

  • Bollerslev, T. (1987) A conditional heteroskedastic time series model for speculative prices and rates of return. Review of Economics and Statistics 69 (3): 542–547.

    Article  Google Scholar 

  • Bollerslev, T. and Wooldridge, J.M. (1992) Quasi-maximum likelihood estimation of dynamic models with time-varying covariances. Econometric Reviews 11 (2): 143–172.

    Article  Google Scholar 

  • Bollerslev, T., Engle, R.F. and Nelson, D.B. (1994) ARCH models. In: R.F. Engle and D. McFadden (eds.) Handbook of Econometrics, Vol. IV, Chapter 49. Amsterdam, The Netherlands: North-Holland.

    Google Scholar 

  • Booth, G., Martikainen, T. and Chowdhury, M. (1996) Common volatility in major stock index futures markets. European Journal of Operational Research 95 (3): 623–630.

    Article  Google Scholar 

  • Broyden, C. (1967) Quasi-Newton methods and their application to function minimization. Mathematics of Computation 21 (99): 368–381.

    Article  Google Scholar 

  • Cabrera, J., Wang, T. and Yang, J. (2009) Do futures lead price discovery in electronic for eight exchange markets? Journal of Futures Markets 29 (2): 137–156.

    Article  Google Scholar 

  • Chng, M.T. (2009) Economic linkages across commodity futures: Hedging and trading implications. Journal of Banking and Finance 33 (5): 958–970.

    Article  Google Scholar 

  • Chulia, H. and Torro, H. (2008) The economic value of volatility transmission between the stock and bond markets. Journal of Futures Markets 28 (11): 1066–1094.

    Article  Google Scholar 

  • Coppola, A. (2008) Forecasting oil price movements: Exploiting the information in the futures market. Journal of Futures Markets 28 (1): 34–56.

    Article  Google Scholar 

  • Dickey, D.A. and Fuller, W.A. (1981) Likelihood ratios statistics for autoregressive time series with a unit root. Econometrica 49 (4): 1057–1072.

    Article  Google Scholar 

  • Engle, R.F. (1982) Autoregressive conditional heteroskedasticity with estimates of the variance of United Kingdom inflation. Econometrica 50 (4): 987–1007.

    Article  Google Scholar 

  • Engle, R.F. and Ng, V. (1993) Measuring and testing the impact of news on volatility. Journal of Finance 48 (5): 1749–1777.

    Article  Google Scholar 

  • Engle, R.F. and Kroner, K.F. (1995) Multivariate simultaneous generalized ARCH. Econometric Theory 11 (1): 122–150.

    Article  Google Scholar 

  • Granger, C.W.J. (1988) Some recent developments in a concept of causality. Journal of Econometrics 39 (1–2): 199–211.

    Article  Google Scholar 

  • Haigh, M. and Bryant, H.L. (2001) The effect of barge and ocean freight price volatility in international grain markets. Agricultural Economics 25 (1): 41–58.

    Article  Google Scholar 

  • Hashmi, A. and Tay, A. (2007) Global regional sources of risk in equity markets: Evidence from factor models with time-varying conditional skewness. Journal of International Money and Finance 26 (3): 430–453.

    Article  Google Scholar 

  • Inegaki, K. (2007) Testing for volatility spillover between the British pound and the euro. Research in International Business and Finance 21 (2): 161–174.

    Article  Google Scholar 

  • Jarque, C.M. and Bera, A. (1980) Efficient tests for normality, homoscedasticity and serial independence of regression residuals. Economics Letters 6 (3): 255–259.

    Article  Google Scholar 

  • Johansen, S. (1988) Statistical analysis of cointegration vectors. Journal of Economic Dynamics and Control 12 (2–3): 231–254.

    Article  Google Scholar 

  • Johansen, S. (1991) Estimation and hypothesis testing of cointegration vectors in Gaussian vector autoregressive models. Econometrica 59 (6): 1551–1580.

    Article  Google Scholar 

  • Kavussanos, M.G. and Visvikis, I.D. (2004) Market interactions in returns and volatilities between spot and forward shipping markets. Journal of Banking and Finance 28 (8): 2015–2049.

    Article  Google Scholar 

  • Kavussanos, M.G. and Visvikis, I.D. (2006) Derivatives and Risk Management in Shipping, 1st edn. UK: Witherbys Publishing and Seamanship International.

    Google Scholar 

  • Kwiatkowski, D., Phillips, P.C.B., Schmidt, P. and Shin, Y. (1992) Testing the null of stationarity against the alternative of a unit root: How sure are we that economic time series have a unit root. Journal of Econometrics 54 (1–3): 159–178.

    Article  Google Scholar 

  • Liu, Q.W. (2005) Price relations among hog, corn, and soybean meal futures. Journal of Futures Markets 25 (5): 491–514.

    Article  Google Scholar 

  • Ljung, M. and Box, G. (1978) On a measure of lack of fit in time series models. Biometrica 65 (2): 297–303.

    Article  Google Scholar 

  • Low, A.H.W., Muthuswamy, J. and Webb, R.I. (1999) Arbitrage, cointegration, and the joint dynamics of prices across discrete commodity futures auctions. Journal of Futures Markets 19 (7): 799–815.

    Article  Google Scholar 

  • McKenzie, A. and Holt, M. (2002) Market efficiency in agricultural futures markets. Applied Economics 34 (12): 1519–1532.

    Article  Google Scholar 

  • Nelson, D.B. (1991) Conditional heteroskedasticity in asset returns: A new approach. Econometrica 59 (2): 347–370.

    Article  Google Scholar 

  • Phillips, P.C.B. and Perron, P. (1988) Testing for a unit root in time series regression. Biometrica 75 (2): 335–346.

    Article  Google Scholar 

  • Schwarz, G. (1978) Estimating the dimension of a model. Annals of Statistics 6 (2): 461–464.

    Article  Google Scholar 

  • Shanno, D.F. and Phua, K.H. (1980) Remark on algorithm 500, a variable metric method for unconstrained minimization. ACM Transactions on Mathematical Software 6 (4): 618–622.

    Article  Google Scholar 

  • Tse, Y. (1998) International transmission of information: Evidence from the Euroyen and Eurodollar futures markets. Journal of International Money and Finance 17 (6): 909–929.

    Article  Google Scholar 

  • Tse, Y. (1999) Price discovery and volatility spillovers in the DJIA index and futures markets. Journal of Futures Markets 19 (8): 911–930.

    Article  Google Scholar 

  • White, H. (1980) A heteroskedastic-consistent covariance matrix estimator and a direct test for heteroskedasticity. Econometrica 48 (4): 817–838.

    Article  Google Scholar 

  • Xu, X.E. and Fung, H.G. (2005) Cross-market linkages between US and Japanese precious metals futures trading. International Financial Markets, Institutions and Money 15 (2): 107–124.

    Article  Google Scholar 

  • Yang, J. and Leatham, D. (1999) Price discovery in wheat futures markets. Journal of Agricultural and Applied Economics 31 (2): 359–370.

    Article  Google Scholar 

  • Yang, J., Bessler, D.A. and Leatham, D.J. (2001) Asset storability and price discovery in commodity futures markets: A new look. Journal of Futures Markets 21 (3): 279–300.

    Article  Google Scholar 

  • Yu, T.H., Bessler, D.A. and Fuller, S. (2007) Price dynamics in US grain and freight markets. Canadian Journal of Agricultural Economics 55 (3): 381–397.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Accounting and Finance, Athens University of Economics and Business, 76 Patission Street, Athens, 10434, Greece

    Manolis Kavussanos

  2. ALBA Graduate Business School, Athinas Avenue & 2A Areos Street, Athens, 16671, Vouliagmeni, Greece

    Ilias Visvikis & Dimitris Dimitrakopoulos

Authors
  1. Manolis Kavussanos
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Ilias Visvikis
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Dimitris Dimitrakopoulos
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Manolis Kavussanos.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Kavussanos, M., Visvikis, I. & Dimitrakopoulos, D. Information linkages between Panamax freight derivatives and commodity derivatives markets. Marit Econ Logist 12, 91–110 (2010). https://doi.org/10.1057/mel.2009.20

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/mel.2009.20

Keywords

Search

Navigation