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Investor Sentiment for Real Assets: The Case of Dry Bulk Shipping Market

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  • Nikos C. Papapostolou
  • Nikos K. Nomikos
  • Panos K. Pouliasis
  • Ioannis Kyriakou

Abstract

We investigate the role of sentiment and its implications for real assets. Using shipping sentiment proxies that capture market expectations, valuation, and liquidity, we construct sentiment indices for the dry bulk shipping market. Evidence suggests that sentiment affects the monthly returns of real assets. The empirical findings also show that market sentiment serves as a contrarian indicator for future cycle phases in all sectors. Furthermore, a sentiment-based trading simulation exercise on the sale and purchase of vessels shows that investors can benefit from higher returns compared to the buy-and-hold benchmark, while partially offsetting the highly volatile nature of the shipping industry.

Suggested Citation

  • Nikos C. Papapostolou & Nikos K. Nomikos & Panos K. Pouliasis & Ioannis Kyriakou, 2014. "Investor Sentiment for Real Assets: The Case of Dry Bulk Shipping Market," Review of Finance, European Finance Association, vol. 18(4), pages 1507-1539.
    • Handle: RePEc:oup:revfin:v:18:y:2014:i:4:p:1507-1539.
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    Cited by:

    1. Alexandridis, George & Kavussanos, Manolis G. & Kim, Chi Y. & Tsouknidis, Dimitris A. & Visvikis, Ilias D., 2018. "A survey of shipping finance research: Setting the future research agenda," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 115(C), pages 164-212.
    2. Papapostolou, Nikos C. & Pouliasis, Panos K. & Nomikos, Nikos K. & Kyriakou, Ioannis, 2016. "Shipping investor sentiment and international stock return predictability," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 96(C), pages 81-94.
    3. Sui, Cong & Wang, Shuhan & Zheng, Wei, 2024. "Sentiment as a shipping market predictor: Testing market-specific language models," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 189(C).
    4. Roar Adland & Pierre Cariou & Francois-Charles Wolff, 2017. "What makes a freight market index ?," Post-Print hal-03913228, HAL.
    5. Pouliasis, Panos K. & Papapostolou, Nikos C. & Kyriakou, Ioannis & Visvikis, Ilias D., 2018. "Shipping equity risk behavior and portfolio management," Transportation Research Part A: Policy and Practice, Elsevier, vol. 116(C), pages 178-200.
    6. Adland, Roar & Cariou, Pierre & Wolff, Francois-Charles, 2017. "What makes a freight market index? An empirical analysis of vessel fixtures in the offshore market," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 104(C), pages 150-164.
    7. Nektarios A. Michail & Konstantinos D. Melas, 2019. "A cointegrating stock trading strategy: application to listed tanker shipping companies," Journal of Shipping and Trade, Springer, vol. 4(1), pages 1-10, December.
    8. Al-Nasseri, Alya & Menla Ali, Faek & Tucker, Allan, 2021. "Investor sentiment and the dispersion of stock returns: Evidence based on the social network of investors," International Review of Financial Analysis, Elsevier, vol. 78(C).
    9. Ioannis C. Moutzouris & Nikos K. Nomikos, 2019. "The formation of forward freight agreement rates in dry bulk shipping: Spot rates, risk premia, and heterogeneous expectations," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 39(8), pages 1008-1031, August.
    10. Ahrends, Meike & Drobetz, Wolfgang & Nomikos, Nikos K., 2018. "Corporate cash holdings in the shipping industry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 112(C), pages 107-124.
    11. Manolis Kavussanos & Siri Pettersen Strandenes & Helen Thanopoulou, 2022. "Special issue: ends of eras and new beginnings: twenty-first century challenges for shipping," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 24(2), pages 347-367, June.
    12. Sakawa, Hideaki & Watanabel, Naoki, 2023. "The impact of the COVID-19 outbreak on Japanese shipping industry: An event study approach," Transport Policy, Elsevier, vol. 130(C), pages 130-140.
    13. Moutzouris, Ioannis C. & Nomikos, Nikos K., 2020. "Asset pricing with mean reversion: The case of ships," Journal of Banking & Finance, Elsevier, vol. 111(C).
    14. Bai, Xiwen & Lam, Jasmine Siu Lee & Jakher, Astha, 2021. "Shipping sentiment and the dry bulk shipping freight market: New evidence from newspaper coverage," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 155(C).
    15. Panayiotis Theodossiou & Dimitris Tsouknidis & Christos Savva, 2020. "Freight rates in downside and upside markets: pricing of own and spillover risks from other shipping segments," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 183(3), pages 1097-1119, June.
    16. Alizadeh, Amir H. & Thanopoulou, Helen & Yip, Tsz Leung, 2017. "Investors’ behavior and dynamics of ship prices: A heterogeneous agent model," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 106(C), pages 98-114.
    17. Yang, Zhongzhen & Jiang, Zhenfeng & Notteboom, Theo & Haralambides, Hercules, 2019. "The impact of ship scrapping subsidies on fleet renewal decisions in dry bulk shipping," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 126(C), pages 177-189.
    18. Papapostolou, Nikos C. & Pouliasis, Panos K. & Kyriakou, Ioannis, 2017. "Herd behavior in the drybulk market: an empirical analysis of the decision to invest in new and retire existing fleet capacity," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 104(C), pages 36-51.
    19. Ioannis Kyriakou & Panos K. Pouliasis & Nikos C. Papapostolou & Nikos K. Nomikos, 2018. "Income uncertainty and the decision to invest in bulk shipping," European Financial Management, European Financial Management Association, vol. 24(3), pages 387-417, June.
    20. Gavalas, Dimitris & Syriopoulos, Theodoros & Tsatsaronis, Michael, 2022. "COVID–19 impact on the shipping industry: An event study approach," Transport Policy, Elsevier, vol. 116(C), pages 157-164.
    21. Konstantinos D. Melas & Photis M. Panayides & Dimitris A. Tsouknidis, 2022. "Dynamic volatility spillovers and investor sentiment components across freight-shipping markets," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 24(2), pages 368-394, June.
    22. Abouarghoub, Wessam & Nomikos, Nikos K. & Petropoulos, Fotios, 2018. "On reconciling macro and micro energy transport forecasts for strategic decision making in the tanker industry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 113(C), pages 225-238.
    23. Moutzouris, Ioannis C. & Nomikos, Nikos K., 2019. "Earnings yield and predictability in the dry bulk shipping industry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 125(C), pages 140-159.

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