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Article

Asymmetric Dependence between Oil Prices and Maritime Freight Rates: A Time-Varying Copula Approach

1
Institute of Economics and International Trade, Pusan National University, Busan 46241, Korea
2
Department of Economics, Pusan National University, Busan 46241, Korea
*
Author to whom correspondence should be addressed.
Sustainability 2020, 12(24), 10687; https://doi.org/10.3390/su122410687
Received: 14 November 2020 / Revised: 18 December 2020 / Accepted: 18 December 2020 / Published: 21 December 2020
(This article belongs to the Special Issue The Future and Sustainability of Financial Markets)
Changes in crude oil price affect the shipping freight market via three different channels. This study explores the dependence structure between oil prices and maritime freight rates to identify the effective channel. Therefore, it investigates the relationship between oil prices and three major maritime freight rates; the Baltic Dry Index (BDI), the Baltic Dirty Tanker Index (BDTI), and the Baltic Clean Tanker Index (BCTI). We employ the decomposition method, not studied in the existing literature, and the copula approach which can identify the time-varying effects and asymmetry in the tail dependence structure between oil prices and freight rates. The main results of this analysis are as follows: the decomposed components display different conditional dependence patterns, and asymmetry is revealed in the upper and lower tail dependence. In the long-run, we find more dependence in extreme periods like the financial crises. In short-run fluctuations, we find the dependence increases in an economic boom. The implications of the results suggest that dependence can vary over time and may change depending on extreme events, implying that the complementary strategies should be different the long-run and short-run. View Full-Text
Keywords: oil price; maritime freight rate; asymmetry; dependence; copula; decomposition oil price; maritime freight rate; asymmetry; dependence; copula; decomposition
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MDPI and ACS Style

Choi, K.-H.; Yoon, S.-M. Asymmetric Dependence between Oil Prices and Maritime Freight Rates: A Time-Varying Copula Approach. Sustainability 2020, 12, 10687. https://doi.org/10.3390/su122410687

AMA Style

Choi K-H, Yoon S-M. Asymmetric Dependence between Oil Prices and Maritime Freight Rates: A Time-Varying Copula Approach. Sustainability. 2020; 12(24):10687. https://doi.org/10.3390/su122410687

Chicago/Turabian Style

Choi, Ki-Hong, and Seong-Min Yoon. 2020. "Asymmetric Dependence between Oil Prices and Maritime Freight Rates: A Time-Varying Copula Approach" Sustainability 12, no. 24: 10687. https://doi.org/10.3390/su122410687

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