Document Type
Article Restricted
Publication Date
8-2014
Journal Title
Transportation Research Part E: Logistics and Transportation Review
Volume Number
68
First Page
79
Last Page
102
Abstract
Extant literature investigates volatility spillovers between spot markets of the same asset class or between derivatives and their underlying spot markets. This paper investigates economic spillovers between the freight and commodity derivatives markets. The economic relationship tested links the derivative price of the commodity transported with the derivative price on the freight rate. High frequency data on commodities are synchronised with freight data and freight rates of different vessels are matched with portfolios (baskets) of commodities that these vessels carry. The investigation of various types of commodities transported under different types of freight contracts reveal that in most cases new information appears first in the returns and volatilities of the commodities futures markets, before it is spilled over into the freight derivatives markets. Thus, agricultural commodity futures informationally lead the freight markets. The results can help improve the understanding of the information transmission mechanisms between freight and commodity markets.