Abstract
Aim: The main objective of this paper is to explore the volatility of ship demolition indices. Ship demolition indices are becoming increasingly important owing to the growing number of norms and rules imposed by the International Maritime Organization. Financial crunch and stricter emission norms are forcing vessel owners to consider ship demolition options. This study examines the volatility of ship demolition rates of the Baltic Demolition Index and the causal relationship between the Chinese and Indian subcontinent indices. Methods: EGARCH models have been used to explore the volatility and asymmetric effects in the time series. The relationship between the two indices was established using the Granger causality test. Results and conclusion: The final analysis confirmed that ship demolition indices are both volatile and asymmetric. This study is unique and useful to ship owners, vessel operators, and banks as it helps them understand the risks involved.
Highlights
Shipbreaking is the disassembling of old ships to recover steel scrap and different materials
The ship demolition segment is hugely important in the maritime domain and responsible for active fleet supply stabilization
The analysis performed in this study propounds essential knowledge of the ship demolition segment, which is different from what was done in earlier studies
Summary
The final analysis confirmed that ship demolition indices are both volatile and asymmetric. Received on: 07.06.2020; Revised on: 27.02.2021; Accepted on: 26.07.2021; Published online: 09.08.2021
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