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| Author: | Koekebakker, S. Adland, R. Sodal, S. |
| Title: | Are spot freight rates stationary? |
| Journal: | Journal of Transport Economics and Policy
2006 : SEP, VOL. 40:3, p. 449-472 |
| Index terms: | freight transport |
| Freeterms: | stationarity |
| Language: | eng |
| Abstract: | In the recent literature, empirical tests of stationarity of freight rates often conclude that spot freight rates are non-stationary processes. However, many maritime economists would argue that the freight rate cannot exhibit asymptotically explosive behaviour, as implied by non-stationarity, in a perfectly competitive freight market. This article restates the theoretical arguments behind mean reversion and boundedness of the spot freight rate process and suggests that the failure to reject non-stationarity may be due to the weak power of the tests most frequently used. A non-linear version of the Augmented Dickey-Fuller (ADF) test is employed, based on an exponentially smooth-transition autoregressive model (ESTAR). |
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