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An analysis of intraday liquidity patterns in the dry bulk FFA market

Haugen, Nicklas Bjørndal; Narum, Håkon
Master thesis
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URI
https://hdl.handle.net/11250/2767353
Date
2021
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  • Master Thesis [3748]
Abstract
This thesis investigates different liquidity measures in the dry bulk FFA market by analyzing

intraday data of quarterly FFA contracts obtained from Braemar Atlantic Securities Limited.

Through intraday data, we conduct analysis previously not accessible on FFA contracts. Due

to the lack of previous research on the subject, this paper applies theory and literature from

analysis with intraday data in stock markets. In addition, the paper uses theory and literature

from previous research on the shipping market. We perform Ordinary Least Squared

regressions on liquidity measures such as bid-ask spread, volatility, and volume, in addition

to providing illustrations of possible patterns through average statistics in figures.

We discover unexpected patterns throughout the day in regard to bid-ask spreads compared to

stock markets. Bid-ask spreads follow a downward trend throughout the day for Capesize and

Panamax contracts, while Supramax has some indication of bettering bid-ask spreads in later

trading hours. The investigation of volatility provides evidence of contracts with longer time

to expiration having less volatility than those with shorter maturities. Furthermore, volume has

suggestions of fewer transactions at opening and closing compared to the rest of the day. In

this paper, we try to find connections between information asymmetry and the different

liquidity measures, using time-dummies at the publication of relevant indices. However, the

findings are ambiguous, and we cannot justify the interpretations. However, there is a

suggestion of bettering BAS values as information flows to the market.

We believe that conducting such an analysis can benefit hedgers, brokers, clearing houses,

investors, and other participants in the dry bulk shipping market, as liquidity in many ways is

connected to transaction costs and risk management. Followingly, identifying liquidity

patterns in the FFA market would be of benefit to market participants. We hope that our thesis

will be of inspiration to future studies.

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