Anna Merika

Modelling the investment decision of the entrepreneur in the tanker sector: choosing between a second-hand vessel and a newly built one

It is often the case that the investor in the shipping sector faces the dilemma of investing in a second-hand vessel or building a new one. This happens because an active second-hand market for almost all kinds of vessels exists. We argue that one of the prime considerations for the investment decision should not be the price of the vessel per se, second-hand (SH) or newly built (NP) but  (a) the relative price ratio (SH/NP) second-hand price over the new building price and  (b) the movement of this ratio. We investigate the determinants of this ratio across different vessel sizes in the tanker sector and show that it can be used as an effective tool in investment decision as well as in asset appraisal. We employ monthly data between 1995 and 2006 for four different ship sizes–VLCC, Suezmax, Aframax and Handysize–and implement an error correction model. The investment decision depends on a number of risk and return variables as well as the perceived speed of adjustment of the price ratio to its equilibrium level. Overall we claim that the cyclicality of the shipping sector together with expectations formed by the agents operating in it (the entrepreneur, the ship-owner and the broker), determine the movement of the ratio and hence the decision of the entrepreneur.

Explaining house price changes in Greece

This article develops an equilibrium model for the Greek housing market that incorporates both macroeconomic and country-specific variables that affect demand for and supply of houses. In the overall upward phase of the 26-year period examined (1985Q1–2010Q4), our investigation of short-term fluctuations in real house prices and stock prices confirms the inverse relationship between movements in the housing price index and the stock exchange general index, identifies the direction of causality as running from the financial sector to the real sector and finds that, following an exogenous shock, reversion to the long-run equilibrium is a rather slow process. Furthermore, we identify a fundamental shift in the behaviour of Greek homeowners, who appear to be moving away from the treatment of housing as consumption good, towards treating house purchases as investment.

Stock Prices Response to Real Economic Variables: The Case of Germany

Purpose –This is a research paper aiming to re-examine Famas proxy hypothesis which states that inflation is negatively related to real economic activity and the negative relationship between stock returns and inflation reflects the positive impact of real variables on stock returns. Design/methodology/approach - Two issues are addressed, first if there is a relationship between the real and financial sectors and once this is established the next step is to investigate the type of relationship present. The study uses annual data covering the years 1960-2000, on the German economy, and builds a VAR model to test the hypothesis of the negative impact of real economic activity on stock returns. Findings - The findings suggest that in Germany employment growth has a negative effect on stock returns and influences positively inflation. The rational lies in the fact that employment growth forecasts inflation which is expected to erode firms profits. This is expressed through falling stock returns. Research limitations/implications- Germany is the largest economy in the European Union, the findings suggest that over the period under examination, the economy operated close to its potential level of output and this has implications for policy formulation. It would have been of interest to use quarterly data, so that the unification factor could be tested. More case studies to this direction should be undertaken. Originality/value - It adds to the understanding and knowledge on a debate that is as current as ever from the point of view of the macroeconomist as well as the politician.

Determinants of the probability of default: the case of the internationally listed shipping corporations

ABSTRACT In this study, we use a sample of 192 listed shipping companies and employ a logit model in order to investigate the determinants of the probability of default. We enhance our analysis by isolating not only the cases of company liquidations but also those cases where companies had to change their legal status due to warning liquidity signals. Our key findings are in line with prior research and moreover we depict a changing trend in the marginal effects of relevant variables, on the probability of default. We further show, through an empirical application, how the obtained results can be used in a managerial decision-making process and in a bank credit underwriting process in order to assess the creditworthiness of a shipping company.

Modelling and forecasting the demolition market in shipping

ABSTRACT We model the demolition market, an integral part of the international shipping industry. It is shown through the implementation of a Vector Autoregressive (VAR) model that international steel-scrap prices contribute decisively towards price discovery in the ship-demolition industry. Our finding is explained and attributed to the fact that the growth models of Southeast Asian countries, where the ship-demolition market is primarily located, rely on scrap metal imports. These are mainly obtained from the developed economies rather than the recycling of vessels. We then proceed to test the forecasting ability of our model and use it for price prediction in the ship-demolition market. We establish that it provides the decision-makers with a useful prediction tool which enables all stakeholders involved, the ship owner, the recycler and the cash buyer alike, to gain valuable insights of the underlying trend in the sector.

Dry Bulk Time Charter Rates Joint Return Distribution Modeling: Copula-Approach

Abstract The paper is the first to the knowledge of the authors to apply copula models to reconstructing joint distribution of time charter rates for dry bulk ship. Based on the Clarksons dataset for the last 20 years it is claimed that Gumbel copula is enough to perform the mentioned objective. To arrive at the conclusion the homogenous dataset in terms of copula structural shifts’ absence is used; a system of criteria for copula selection based on goodness -of-forecast criteria is implemented. The evidence suggests dry bulk time charter rates weekly returns exhibit symmetric distribution. As an auxiliary output stands for the result of copula fit accounting for time dynamics and not. For the purpose of conservative analysis (i.e. risk-management) approach disregarding time-dynamics should be preferred as yielding the least number of value-at-risk breaches. From the risk budgeting perspective non-conservative approach (accounting for time dynamics) might be preferred as reflecting the rapidly changing value-at-risk.

Corporate Social Responsibility (CSR) Revisited: The Case of International Shipping

This study examines the relationship between Corporate Social Responsibility (CSR) and corporate performance using a sample of listed shipping companies. Recognizing heterogeneous CSR behavior across shipping companies, we employ Markov Chain Monte Carlo techniques for Bayesian inference and estimate the marginal effects of profitability and financial structure on our CSR index for each firm. The relationship between CSR behavior and corporate performance is positive for 52% and negative for 48% of the companies. This different impact of profitability on CSR behavior is attributable to the choice of the flag state and to the location of stock exchange listing.