The Applicabilition Of Portfolio Therory In Shipping Market

Although the theory of portfolio in the securities investment market has become more and more mature and has been included in a variety of books and papers, it is hard to find such book that is focused on how to choose portfolio routes/ hull forms in the shipping market. In fact, all the investors will face with the problem of selecting routes/hull forms before they decide to invest in the shipping market .Is it better to choose a single asset or make a portfolio? Should we give equal proportions on each assets or place extra proportion on some routes/hull forms? Whether is there any difference between long-term investment and short-term operation? All of these questions come down to profit and attract large amount of people to research on them. The aim of the thesis is to help people avoid risk effectively and achieve a competitive strategy by using portfolio theory in bulk and tanker market.In the second and third chapters of the thesis, the dry bulk market and tanker market are introduced respectively, such as main routes, all type of hull forms and characteristics of shipping market.And then related coefficient and corresponding reasons are given out. Chapter IV is focusing on portfolio theory of Markowitz which consists of two models. They are equal proportions of investment model and non-equal ratio of investment model. A new attempt which is partial to conservative is propounded to distribute property on each asset. The distribution bases on alteration of variance and the one which is more fluctuant gets less. The fifth chapter is also an emphasis of this Master's thesis, some econometric theory is introduced into shipping market to distinguish cointegration between long-term and short-term market. At the last section, historical rate datas from January 2000 to December 2007 of three bulk and four tanker routes/hull forms are used to verify the applicability of portfolio model in shipping market.It is known from the Conclusion that the portfolio theory is of practical use in shipping market and composition of routes/hull forms could reduce risk. However, the number of assets can't be too much. Portfolio theory is followed when the number is less than four, while the number is over four; portfolio theory loses its fascination. Moreover, the relevance of the internal market is often higher than the external market, so, if the assets of portfolio come from the same market, the possibility of reduction risk will be lower than the assets from different markets.In addition, Cointegrations are not the same and the one in long-term market is higher than short-term market, therefore, people should adopt multi-strategies.In this thesis, the risk and distribution models are static and all the proportion on each route/ship type is identified. As a matter of fact, investors will change their decision to get more profit from time to time.When we define selling out and buying in as the end of the least transaction and the beginning of the next transaction correspondingly, such a change should be considered as a completed transaction. It will be a great progress to use dynamic models which can offer better suggestion for investors.