Investigation of the relationship of the Shipowner’s sentiment and the volatility of freight rates in the bulk sector and the development of a quantitative model for predicting freight rates

Abstract

This dissertation undertakes to shed light on the role of Shipping sentiment and its implications for the determination of the Baltic Dry Index. After a brief theoretical approach on the Shipping industry and its characteristics, the behavioral of sentiment and the unique characteristics of the shipping cycle, we use shipping sentient proxies to capture the expectations of the dry-bulk shipping market and if it affects the Shipping Industry and the shipping cycle by examining the impact on Baltic Dry index. Some of the used proxies are contracting, money committed, newbuildings and secondhand prices, etc. Also, along with the shipping sentiment, a wide range of market and macroeconomic indicators, that capture financial conditions, volatility, macroeconomic conditions, are analyzed regarding to BDI by utilizing the Generalized Least Square (GLS) regression methodology. The results of our analysis concludes that shipping sentiment is a significant factor that determines the Baltic Dry Index.