Shipping equity risk behavior and portfolio management. (October 2018)

• Record Type: Journal Article
• Authors: Pouliasis, Panos K.; Papapostolou, Nikos C.; Kyriakou, Ioannis; Visvikis, Ilias D.
• Is Part Of: Transportation research. Volume 116(2018)
• Page Start: 178
• Page End: 200
• Publication Date: 2018-10
• Subjects: Shipping stocks -- Volatility forecasting -- Risk assessment practices -- Tail systemic risk -- Portfolio strategies; Transportation -- Research -- Periodicals; 388.011
• DOI: 10.1016/j.tra.2018.06.016
• Languages: English
• ISSNs: 0965-8564

Abstract

Highlights: Study volatility dynamics of shipping stocks using mixture distributions. Model is examined in terms of value-at-risk, risk spillovers and systemic risk. Offer insights to investor's risk quantification practice and regulatory policies. Extend our framework to dynamic correlations to devise investment strategies. Portfolio allocation practices timing volatility/correlation yield significant gains. Abstract: This paper investigates the dynamics of stock price volatility for different vessel-type segments of the U.S, water transportation industry. We measure market exposure by a portfolio of tanker, dry bulk, container, and gas stocks to examine tail behavior and tail risk dependence. The role of mixture distributions in predicting future volatility is studied from both statistical and economic perspectives. We further test for predictability in co-movements in the tails of sectors returns. Findings indicate that large losses are strongly correlated, supporting asymmetric transmission processes for financial contagion. Finally, using a non-parametric approach, we extend the model to the multivariate case and assess the value of volatility and correlation timing in optimal portfolio selection. The results can help to improve the understanding of time-varying volatility, correlation and tail systemic risk of shipping stock markets, and consequently, have implications for risk management and asset allocation practices, as well as regulatory policies.