Investor domicile and second-hand ship sale prices

ABSTRACT

This paper investigates the contribution of investor domicile effects to second-hand bulk transaction price formation. The dataset covers transactions for Handysize bulk carriers between 1996 and 2016. We apply a two-stage regression approach, first capturing the effects of vessel age and market conditions in a non-parametric model and, in a second stage, adapting fixed-effect models to investigate investor domicile effects and ship-specific factors. We show that investor domicile effects, as well as domicile match effects, can have a statistically significant impact on sales prices. We suggest that these effects may be due to domestic economic conditions affecting the cost of financing, average investor experience, and cultural biases in negotiations.

KEYWORDS:

• Second-hand transaction price
• handysize bulk
• non-parametric
• investor domicile effects
• micro-economics

Acknowledgments

The authors would like to thank four reviewers and editor for providing us with constructive comments and suggestions to improve this manuscript.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Prices are collected for various sizes and ages of vessels for the main vessel types and relate to market sales where these have taken place. Source: https://www.clarksons.net/archive/research/archive/SNM/SIW_SNM.pdf

2. A more scientific approach using least square cross validation resulted in bandwidths that were obviously too low. Using 10% ensures a continuously declining vessel value surface as a function of increasing age and lower freight rate.

Additional information

Funding

This work was supported by the Hong Kong Polytechnic University [grant number P0009561 or G-YBTM].