Investor Sentiment for Real Assets: The Case of Dry Bulk Shipping Market*

Abstract

This is the accepted version of the paper.This version of the publication may differ from the final published version. Further, a sentiment-based trading simulation exercise on the sale and purchase of vessels shows that investors can benefit from higher returns compared to the buy-and-hold benchmark, while partially offsetting the highly volatile nature of the shipping industry. Permanent

A survey of shipping finance research: Setting the future research agenda

“…• Shipping investment activity is more volatile as the time-to-build period declines, implying that shipowners respond to economic conditions more rapidly as the construction lag for a newbuilding vessel reduces Papapostolou et al (2014) Investigation of the predictive power of market sentiment in shipping investment strategies 192 monthly observations 1996-2012…”

“…This investment behaviour can result in dramatic excess volatilities in vessel prices. In a related study, Papapostolou et al (2014) develop a sentiment index for the dry-bulk market. Specifically, the authors show that market sentiment can serve as a contrarian predictor of future vessel prices in the dry bulk segment.…”

The formation of forward freight agreement rates in dry bulk shipping: Spot rates, risk premia, and heterogeneous expectations

“…Finally, we also examine whether the number of second‐hand vessel transactions within a given month, scaled by the corresponding fleet size, can predict future risk premia. This can be used both as a measure of liquidity (Nomikos & Moutzouris, ) and as a proxy for investor sentiment (Papapostolou, Nomikos, Pouliasis, & Kyriakoy, ). The results (not presented here) suggest that there is evidence of statistically significant predictability of future risk premia.…”

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

“…The estimate of earnings is forward-looking and reflects the expected earnings from operating the vessel for one year from the point of valuation, i.e., high (low) P E ratios translate to high (low) current vessel prices relative to the one-year earnings. Papapostolou et al (2014) argue that high P E ratios are associated with low investor sentiment levels, which may lead to higher levels of scrapping and low investment in newbuilding orders. The second metric is the secondhand-newbuilding price (SNB) ratio which belongs to the market conditions category:…”