The Volatility in the Dry Bulk Panamax Segment

The world dry bulk shipping is characterized as a volatility industry and especially after the long lasted peak of 2003 the market is much more perplex. This research paper’s aim is to find and analyze the volatility of the dry Panamax sector. This study is based on quantitative analysis using the Eviews 7 software. A sample of 2908 daily and 140 monthly observations of daily earnings of various Panamax routes and 1587 daily observation of the contract prices of the Forward Freight Agreements were used. The sample periods were from 1 November 2002 to 27 June 2014 and from 1 August 2007 to 2 December 2013 for the daily index, monthly index and the FFAs respectively. Applying the descriptive statistics measurements a brief overview has been obtained of the distribution of the indexes. With the application of the EGARCH there is an asymmetry impact between past shocks and current volatility. Moreover the volatility reacts differently to positive and negative shocks and the time needed for the volatility to respond to changes. Finally an analysis between the FFA contract and the underlying asset has been conducted. The analysis of these results will be useful to for ship owners/managers and charterers in the dry Panamax sector to increase their profits and mitigate their risks.