Spatial efficiency in the dry bulk supramax market: an investigation through cointegration and profitable trading
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- Master Thesis 
The freight rates across geographical regions in the drybulk segment may experience substantial differences on a short-term basis, but generally move in tandem in the long-term. If these temporary differences cannot be exploited financially by applying trading rules based on publicly available information, then the market can be viewed as spatially efficient. This paper uses cointegration analysis to establish the long-term relationship between supramax tripcharter rates, and moves on to evaluate the financial profitability of trigger based trading rules. These rules are based on spreads between certain tripcharter rates. The trading rules are applied in order to investigate whether the short-term differences allowed under cointegration are transient enough to coincide with a spatially efficient market. The results provide evidence of a profitable trading strategy, but when accounting for potential off-hire ballasting activity these profits are zeroed out. Thus, the conclusion points towards a spatially efficient dry bulk supramax market.