A0400
Title: Levels or directions: Forecasting forward freight agreements
Authors: Lisa Maria Assmann - Norwegian School of Economics (Norway)
Jonas Andersson - Norwegian School of Economics (Norway) [presenting]
Roar Adland - Norwegian School of Economics (Norway)
Abstract: The aim is to investigate how to best forecast the forward market for maritime freight. Complementing existing studies that are mostly based on statistical evaluation measures, the focus is on the economic consequences of predictions and mimicking a trader's decision in the freight forward market. This leads to a comparison of directional and point forecasting methods, concluding that predictions based on past directions are significantly better economically. With the unrealistic assumption that trading signals based on closing prices can be executed without delay, significant profits are found. If a more onerous assumption of one day price slippage is implemented, prompted by signs of illiquidity in the FFA market, resulting profits are diminished, challenging the robustness of the conclusion of an inefficient FFA market in practice.
