An Empirical Study of the Impact of Three Shipping Freight Rate Indices on Shipping Company Stock Prices

Abstract

Purpose - In this study, stock data of shipping companies were selected from three countries, USA, China, and Korea, to investigate the impact of fluctuations in different shipping freight indices on shipping company stock prices. Design/Methodology/Approach - Johansen cointegration tests were used in this study to look at the longrun equilibrium relationships between shipping freight indices and the stock prices of shipping companies. Next, the short-term adjustment effect of different shipping freight indices on shipping company stock prices was analyzed by establishing a VECM model. Finally, the responses of shipping company stock prices to shocks from different shipping freight indices were analyzed by forecast error variance and impulse response functions based on the VECM model. Findings - The cointegration test demonstrated a long-run equilibrium relationship between each shipping company’s stock price and the three shipping freight indices (BDI, BDTI, SCFI). The results of IRF and forecast error variance decomposition showed that the response of shipping company stock prices to shocks from the SCFI is weak compared to the shocks from the BDI and BDTI. The BDI has the same explanatory power for the forecast error variance of HMM and MATX, and the shocks from the BDTI contributed the most to explaining the forecast variance error of COSCO_SH. Research Implications - The analysis findings of this research are meant to give investors within the market certain reference information to reduce investment risks.