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Risk and return of U.S. water transportation stocks over time and over bull and bear market conditions

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  • Manolis G. Kavussanos
  • Stelios N. Marcoulis

Abstract

The aim of this paper is to investigate the behaviour of water transportation company stock returns in the U.S. stock exchanges from 1985 to 1994 in order to determine whether the systematic risk of this industry is different from that of the ‘average’ company in the market, whether it has changed over the ten year period, over bull and bear market conditions, and whether there is a firm ‘size’ effect in the industry. In the context of the Capital Asset Pricing Model ( Capm ), we find that the systematic risk of the shipping industry return is not different from that of the ‘average’ company. It is also found that the covariance of water transportation companies with respect to the overall stock market return did not change over the ten year period although it appears that it has changed over normal upward/downward market movements. There is also reasonable evidence that the intercept of the equation might have changed over normal upward/downward market movements. Finally, we document contradictory evidence regarding the size effect; during the period 1985--1989 we find small companies to have significantly higher returns and risk while during the period 1990--1994 medium size companies tend to have higher risk than small and large firms, which is not however compensated by higher returns.

Suggested Citation

  • Manolis G. Kavussanos & Stelios N. Marcoulis, 1997. "Risk and return of U.S. water transportation stocks over time and over bull and bear market conditions," Maritime Policy & Management, Taylor & Francis Journals, vol. 24(2), pages 145-158, January.
    • Handle: RePEc:taf:marpmg:v:24:y:1997:i:2:p:145-158
    DOI: 10.1080/03088839700000066
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    References listed on IDEAS

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    1. Stone, Bernell K., 1974. "Systematic Interest-Rate Risk in a Two-Index Model of Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 9(5), pages 709-721, November.
    2. Smirlock, Michael & Kaufold, Howard, 1987. "Bank Foreign Lending, Mandatory Disclosure Rules, and the Reaction of Bank Stock Prices to the Mexican Debt Crisis," The Journal of Business, University of Chicago Press, vol. 60(3), pages 347-364, July.
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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. Panayides, Photis M. & Lambertides, Neophytos & Cullinane, Kevin, 2013. "Liquidity risk premium and asset pricing in US water transportation," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 52(C), pages 3-15.
    3. Drobetz, Wolfgang & Menzel, Christina & Schröder, Henning, 2016. "Systematic risk behavior in cyclical industries: The case of shipping," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 88(C), pages 129-145.
    4. Photis Panayides & Neophytos Lambertides, 2011. "Fundamental Analysis and Relative Efficiency of Maritime Firms: Dry Bulk vs Tanker Firms," Chapters, in: Kevin Cullinane (ed.), International Handbook of Maritime Economics, chapter 5, Edward Elgar Publishing.
    5. Kavussanos, Manolis G. & Marcoulis, Stelios N., 2004. "4. Cross-Industry Comparisons Of The Behaviour Of Stock Returns In Shipping, Transportation And Other Industries," Research in Transportation Economics, Elsevier, vol. 12(1), pages 107-142, January.
    6. Wolfgang Drobetz & Dirk Schilling & Lars Tegtmeier, 2010. "Common risk factors in the returns of shipping stocks," Maritime Policy & Management, Taylor & Francis Journals, vol. 37(2), pages 93-120, March.
    7. Manolis G. Kavussanos & Stelios N. Marcoulis, 1998. "Beta comparisons across industries—a Water transportation industry perspective," Maritime Policy & Management, Taylor & Francis Journals, vol. 25(2), pages 175-184, January.

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