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Analysis of Stock Returns in Global Shipping

  • The purpose of this study is to investigate the stock price evolution of international shipping companies through the construction of the Piraeus Bank Shipping Index (PBSI) and via three individual shipping activity indices that focus on the main sectors of commercial shipping (PBSI - Tanker, PBSI - Container, PBSI - Dry Bulk).
  • Companies operating in marine shipping operate in a volatile environment, since they are affected by the world economy business cycle, changes in prices of internationally traded commodities such as oil and steel, as well as geopolitical risks.
  • Despite the fact that from 2010 to 2013, bonds were the primary source of funding for companies operating in the shipping sector, in 2014 there was a large spike in share capital increases through follow-on issues.
  • Consequently, we proceed to investigate the underlying factors that may be associated with market valuations of shipping stock indices. Our analysis is based on a relatively large number of macroeconomic and financial variables which are thought to be related to the global economy and more specifically to the international flows of maritime trade.
  • The main conclusions of our statistical analysis can be summarized by the fact that freight rates are the most important factor underlying the development of shipping equity indices. The mechanism of the effect of this factor works firstly through orders of new ships and therefore the expected rate of expansion of the shipping fleet, and subsequently by global demand and international trade.
  • Not all indicators are affected by the same factors or through the same mechanism. For example, the PBSI-tanker index is affected to a greater extent by the valuation of global stock markets, and relatively less by freight rates as represented by the BDI index. The other indicators exhibit a stronger relation with variables that are based on export oriented business and international trade.

Ilias Lekkos

Group Chief Economist

                                                                                                                   


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