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Herd behavior in the drybulk market: An empirical analysis of the decision to invest in new and retire existing fleet capacity

Papapostolou, N. C., Pouliasis, P. K. and Kyriakou, I. (2017). Herd behavior in the drybulk market: An empirical analysis of the decision to invest in new and retire existing fleet capacity. Transportation Research Part E: Logistics and Transportation Review, 104, pp. 36-51. doi: 10.1016/j.tre.2017.05.007

Abstract

We examine whether investors herd in their decision to order or scrap vessels in the drybulk market. We decompose herding into unintentional and intentional, and test for herd behavior under asymmetric effects with respect to freight market states, cycle phases, risk-return and valuation profiles, and ownership of the vessel. We detect unintentional herd behavior during down freight markets and contractions. Furthermore, we find evidence of spill-over unintentional herding effects from the newbuilding to the scrap market. Finally, asymmetric herd effects are evident between traditional and liberal philosophy towards the ownership of the vessel, and during extreme risk-return and valuation periods.

Publication Type: Article
Additional Information: © 2017, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/
Publisher Keywords: Herding; Ship finance; Contracting; Scrapping
Subjects: H Social Sciences > HG Finance
Departments: Cass Business School > Finance
URI: http://openaccess.city.ac.uk/id/eprint/17128
[img] Text - Accepted Version
This document is not freely accessible until 25 November 2018 due to copyright restrictions.
Available under License Creative Commons Attribution Non-commercial No Derivatives.

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