Research Of The Co-movement Between Shipping Market And Stock Market

The international shipping industry flourishes in the recent years and the shipping market is closely related to various countries,which fluctuates violently.During the period of the US sub-prime crisis,the international shipping market experienced unprecedented bull market and bear market.In May 2008,the shipping index rose to the historical high of 11793 points,and then drop sharply to 663 points.After that,the index remained low and in 2016 it hit a new low of 290 points.However,on March 29 it rose to 1338 points,which was a new high since November 2014.So the shipping market changes all the time and is hard to predict the future development.China as a trading power,has become the largest importer after beyond Germany in 2013.As a result,our country has a bigger and bigger effect on the international shipping market.At the same time,the United States is a typical representative of the developed market,which can significantly affect the world economy.Chinese and the United States stock market can be the benchmark of their macroeconomic,which have a similar fluctuation trend with the international shipping market.Therefore,the study of the co-movement between the shipping market and Chinese as well as the US stock market contributes to predict the future trend of the market,maintain the financial security and provide the investors with the accurate basis for making decision.This paper combining the theories with empirical analysis,makes a comprehensive analysis of the shipping market with Chinese as well as the US stock market.First of all,the article elaborates the theoretical mechanism of co-movement effect from the economic fundamentals and market transmissions.Subsequently,this paper selects the daily closing price from January 2001 to January 2017 of BDI,the Shanghai Composite Index and the Dow Jones Industrial Average,which are on behalf of those markets.Especially,the article extracts the data during the financial crisis period as a sub-sample.The article uses co-integration test,Granger causality test,error correction model,impulse response,DCC-EGARCH model,spillover index and other related measurement methods.At last,this paper studies the fluctuation between the shipping market?Chinese shipping index and the US shipping market,trying to find the co-movement effect.Analyzing the two sets of samples,we can come to some conclusions.In the full sample,the long term equilibrium relationship is existed between BDI and the Shanghai Composite Index;however there is no co-integration relationship between BDI and DJIA.In the sub sample,co-integration relationship doesn't exist.From the result of Granger causality test,there exists a mutual cause-and-effect relationship between the change of BDI and the change of the Shanghai Composite Index in the full sample;in the both samples,BDI return can one-way Granger cause the Shanghai Composite Index return,while there is no causal relationship between BDI return and DJIA return.The change of BDI has a self-regulation mechanism,while the change of the Shanghai Composite Index doesn't have.In the whole sample,BDI and the Shanghai Composite Index can mutually produce a significant positive impact;however there is no impulse response between BDI return and the other two yield series in the both samples.In addition,there is a negative correlation between BDI return and DJIA return,and the Shanghai Composite Index return can positively affect BDI return as long as BDI return negatively leads the Shanghai Composite Index return.Also,the dynamic correlation coefficient between the shipping market and Chinese stock market is positive,but the coefficient is not significant with the US.The spillover index between the shipping market and Chinese stock market will increase during the financial crisis.In addition,this paper reaches some conclusions in the study of BDI?Chinese shipping index and DJTA.BDI has a long-term equilibrium relationship with the shipping index and the coefficient is negative.There is a positive pulse effect between BDI and the shipping index,while the impulse response between BDI return and the other index return is nearly negligible.In the information dissemination between BDI return and RDJTA return,the asymmetric effect is significant.Also,the dynamic correlation coefficient between the international shipping market and the other market is significantly positive,and the international shipping market plays the leading role since 2014.Comparing the analysis of the co-movement between the international shipping market and the two stock markets,we can find that the effect between the shipping market and Chinese stock market is more significant.So,the trend of the shipping market can predict our overall stock market as well as predict the trend of shipping stocks.In addition,our stock market still lags behind mature markets,and there are many aspects we need to improve,such as the system,capital structure and so on.