Time series analysis of the lead-lag relationship of freight futures and spot market prices
Massachusetts Institute of Technology. Dept. of Mechanical Engineering.
Henry S. Marcus.
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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.
Thesis (S.M.)--Massachusetts Institute of Technology, Dept. of Mechanical Engineering, 2008."September 2008."Includes bibliographical references (p. 96).
DepartmentMassachusetts Institute of Technology. Dept. of Mechanical Engineering.
Massachusetts Institute of Technology