Herd behavior in the drybulk market: an empirical analysis of the decision to invest in new and retire existing fleet capacity. (August 2017)

• Record Type: Journal Article
• Authors: Papapostolou, Nikos C.; Pouliasis, Panos K.; Kyriakou, Ioannis
• Is Part Of: Transportation research. Volume 104(2017)
• Page Start: 36
• Page End: 51
• Publication Date: 2017-08
• Subjects: Herding -- Ship finance -- Contracting -- Scrapping; Logistics -- Periodicals; Transportation -- Periodicals; 388.011
• DOI: 10.1016/j.tre.2017.05.007
• Languages: English
• ISSNs: 1366-5545

Abstract

Highlights: Examine herd behavior in the shipping industry. Detection of unintentional herding in newbuilding and scrap markets. Establish asymmetric herd behavior during down markets. Scrap market is affected by spill-over herding effects in the newbuilding market. 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.