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Abstract
Cyclical behaviour in the shipping market was investigated, for the first time, using Fourier analysis to extract cycle frequency information from data which have been Hodrick–Prescott filtered; in this case, dry freight earnings data. An industry rule of thumb asserts that shipping cycles last 7 years, but using a sample of daily dry charter earnings over a 21-year period, a prominent 4-year shipping cycle in the dry bulk sector is found, with a longer 7-year cycle superimposed. A better understanding of the shipping cycle will facilitate investment, since timing has been identified as a principal decision-driver.
Notes
1. Based on time series data of the Maritime Economics Freight Index dating from 1741, with the first recorded peak occurring in 1743 (Stopford Citation2009a, 757–758).
2. Annual percentage change of Maritime Economics Freight Index used from 1970 to 2007, whereas from 2008 to 2011 the Clarksea Index Bulker Earnings was used.
3. From 1999 to 2011 Baltic Dry Index (BDI), prior mathematical adjustment, from 1985 to 1999 was known as Baltic Freight Index (BFI). For reasons of consistency, as per market standard, the index has been referred to as the BDI from 1990.
4. That is, the 2-sided HP filter uses past and future data to estimate the components of Equation 1, so cycle data generated using it could be biased.