Investigating the cyclical behaviour of the dry bulk shipping market

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.