The Effect of Bunker Prices on the Volatility and Return Structure of Time Charter Market in Maritime Transport

Abstract

The fluctuation in the prices in the maritime market concerns many people and institutions such as shipowners, chartering companies, financial companies and investors. In this study, it is aimed to examine the effect of bunker prices on time charter volatility structures in three different dimensions of the bulker, containership and tanker markets for the period between July 2001 and June 2021. For this purpose, GARCH-X and GJR-GARCH-X models are used. According to our findings, the consideration of bunker prices has a reducing effect on the volatility of small and mid segments of tanker markets; mid and big size segments of bulker markets; small and mid size segments of container markets. As a result, it would be beneficial for maritime transport companies to have a strategic policy and risk management understanding regarding the special impact of bunker prices on their businesses.