The Baltic Dry Index as a Predictor of Global Stock Returns, Commodity Returns, and Global Economic Activity

Understanding the Decline in the Price of Oil Since June 2014

“…This index has been designed as a measure of the business cycle in industrial commodity markets and can be interpreted as a leading indicator for global industrial production (also see Bakshi, Panayotov and Skoulakis 2011). Negative index number values represent recessionary phases and positive numbers expansionary phases.…”

New Evidence on the Information and Predictive Content of the Baltic Dry Index

“…As a matter of fact, the BDI could also reflect some speculative movements, since there are futures contracts on BDI (albeit with small volumes) and the underlying freight market may also reflect the speculative actions of market participants. One of the very limited papers that consider a shipping index as a leading indicator to predict a number of economic and financial variables is that of Bashki et al [20] who argue that this shipping indicator has strong predictability in terms of commodity assets and low predictability in terms of stock market assets.…”

The skewness of commodity futures returns

“…[Insert Table V around here] 11 Following the literature, the business cycle indicators are the default spread (yield differential between BAA and AAA bonds), TED spread (3-month LIBOR minus 3-month T-bill rate), term spread (10-year T-bond minus 3-month T-bill yield), daily change in VXO index and, given our commodity focus, the change in the Baltic Dry index (Bakshi et al, 2012). Interest rates and VXO data are obtained from the FED and CBOE websites, respectively, and Baltic Dry Index from Bloomberg.…”