The exposure of shipping firms’ stock returns to financial risks and oil prices: a global perspective

El‐Masry, Ahmed; Olugbode, Mojisola; Pointon, John

doi:10.1080/03088839.2010.503713

Cited by 32 publications

(19 citation statements)

References 65 publications

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“…Evidence on the influence of news in crude oil prices on shipping companies' stock returns is again mixed. On one hand, Grammenos and Arkoulis (2002) reported that companies' stock returns were negatively affected by oil price changes, Kavussanos and Marcoulis (2000), Drobetz et al (2010) and El-Mashry et al (2010) on the other, argued that oil prices may be a contributor to stock returns given that oil is the major input for generating cargo service.…”

Section: Factor Constructionmentioning

confidence: 99%

“…However, research on the global shipping industry has lagged behind and was mainly concentrated on the investigation of the sources of shipping finance and capital structure of shipping companies, investment and valuation, corporate governance and risk measurement and management (Alexandridis et al, 2018). Grammenos and Marcoulis (1996), Poulakidas and Joutz (2009), Grammenos and Arkoulis (2002), Drobetz et al (2010Drobetz et al ( , 2016, El-Mashry et al (2010) and Westgaard et al (2017) found that factors such as inflation, industrial production, exchange rates, interest rates and oil prices were important for stock returns of global shipping companies. Kavussanos et al (2002aKavussanos et al ( , 2002b) investigated 38 international industries and found that various macroeconomic, global risk factors have had different impacts on industries as determined by their unique characteristics.…”

Section: Introductionmentioning

confidence: 99%

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Global risk factors of NYSE- and NASDAQ-listed shipping companies’ stock returns

Laopodis

2021

MABR

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Purpose This paper aims to investigate the impact of global macro and other risk factors of the New York Stock Exchange (NYSE)- and National Association of Securities Dealers Automated Quotation (NASDAQ)-listed shipping companies’ stock returns from January 2001 to December 2019. Design/methodology/approach The methodological design includes multi-factor regressions for individual companies, augmented versions of these regressions to examine the likely impact of additional factors and finally panel regressions to assess the impact risk factors on all companies simultaneously. Estimations are done via ordinary least squares and the generalized method of moments. Findings Multi-factor model results showed that some of the US-specific and global macro risk factors surfaced as statistically significant for most of the companies and appeared to exhibit a consistent pattern in the way they affected shipping stocks. Thus, these companies’ exposures emanate mostly from the general US market’s movements and to a lesser extent from other firm-specific factors. Second, from the results of panel specifications, this study observes that domestic risk factors such as unemployment, inflation rates and industrial production growth emerged as significant for the NYSE-listed companies. As regard, the NASDAQ-listed ones, it was found that Libor and the G20 inflation rate were also affecting their stock returns. Research limitations/implications Companies examined are listed only in the US’s NYSE and NASDAQ. Hence, companies listed elsewhere were excluded. It may be concluded that these US exchange-listed companies abide mostly by domestic fundamentals and to some extent to selected global factors. Practical implications The significance of the findings in this study pertains to global investors and shipping companies’ managers alike. Specifically, given the differential sensitivities of the shipping companies to various risk factors (and the global business cycle, in general), it is possible to view the shipping companies’ stocks as a separate, alternate asset class in a global, well-diversified portfolio. Thus, such a broader portfolio would permit investors to earn positive returns and reduce overall risk. Managers of shipping companies would also benefit from the findings in this study in the sense that they should better understand the varying exposures of their companies to changing global and domestic macro conditions and successfully navigate their companies through business cycles. Originality/value Research on the global shipping industry has lagged behind and was mainly concentrated on the investigation of the sources of shipping finance and capital structure of shipping companies, investment and valuation, corporate governance and risk measurement and management. Empirical research on the potential micro and macro determinants of the stock returns of shipping companies, however, is scant. This paper fills the gap in the literature of identifying and evaluating the various macroeconomic, US and international risk, factors that affect shipping companies’ stock returns in a highly financially integrated world.

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Section: Factor Constructionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Global risk factors of NYSE- and NASDAQ-listed shipping companies’ stock returns

Laopodis

2021

MABR

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“…Poulakidas and Joutz [9] showed that tanker demand comes from the oil demand, and thus tanker rates respond highly to the oil prices. El-Masry et al [10] explored the influence of macroeconomic factors, including oil prices on shipping firms' stock returns. They found that the increase in oil prices significantly influences the minority of shipping companies.…”

Section: Literature Reviewmentioning

confidence: 99%

Asymmetric Dependence between Oil Prices and Maritime Freight Rates: A Time-Varying Copula Approach

Choi¹,

Yoon²

2020

Preprint

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Changes in crude oil price affect the shipping freight market in three different channels. This study explores the dependence structure between oil prices and maritime freight rates to identify the strongest channel. Therefore, it investigates the relationship between oil prices and three major maritime freight rates; the Baltic Dry Index (BDI), the Baltic Dirty Tanker Index (BDTI), and the Baltic Clean Tanker Index (BCTI). We employ the decomposition method, not studied in the existing literature. The copula approach identifies the time-varying effects and asymmetry in the tail dependence structure between oil prices and freight rates. The main results of this analysis are as follows. The decomposed components display different conditional dependence patterns, and asymmetry is revealed in the upper and lower tail dependence. In the long run, we find more dependence in extreme periods like the financial crises. In short-run fluctuations, we find the dependence increases in an economic boom. The implications of the results suggest that dependence can vary over time and may change depending on extreme events, implying that the complementary strategies of the long run and short run should be different.

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“…The low importance of country-specific factors in the stock performance of shipping companies is even more evident when foreign exchange rates are considered. Given that US dollars are the predominant currency that it is used by shipping companies, the majority actively uses currency hedging techniques that ultimately leave companies indifferent from fluctuations in the currency markets (El-Masry et al 2010).…”

Section: Literature Reviewmentioning

confidence: 99%

A cointegrating stock trading strategy: application to listed tanker shipping companies

Michail

Melas

2019

J. shipp. trd.

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In the current paper, we propose a strategy to trade a portfolio of listed shipping companies in the US market. In particular, we estimate a co-integrating relationship between the weekly stock market returns of a portfolio of tanker shipping companies and the Baltic Tanker Index, exploiting the close relationship between freight rates and the stock market performance of shipping companies. Our results suggest that a trading strategy on the basis of a co-integrating relationship and a simple moving average rule outperforms, by approximately 50%, a standard buy-and-hold strategy in various investment horizons, often by a very wide margin. Given the latter, the results allow us to enhance the current literature on shipping finance by providing evidence of how simple investment strategies can benefit both retail and institutional investors who do not have direct exposure or experience in the shipping industry by allowing them to include shipping stocks in their portfolios.

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The exposure of shipping firms’ stock returns to financial risks and oil prices: a global perspective

Cited by 32 publications

References 65 publications

Global risk factors of NYSE- and NASDAQ-listed shipping companies’ stock returns

Global risk factors of NYSE- and NASDAQ-listed shipping companies’ stock returns

Asymmetric Dependence between Oil Prices and Maritime Freight Rates: A Time-Varying Copula Approach

A cointegrating stock trading strategy: application to listed tanker shipping companies

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