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Sinking Ships: Asset Prices and the Predictability of Returns on Shipping in Recessions
I document that future returns on dry-bulk ships are strongly predictable and negatively related to current ship earnings, prices, and investment during recessions, but are not forecastable otherwise. Empirical evidence points against standard behavioural and risk-based explanations of return predictability. I argue that predictability in recessions arises due to liquidity constraints. When cash flows evaporate, distressed firms are forced to sell assets to their liquidity-constrained peers, resulting in falling prices and rising expected returns for buyers. This theory is consistent with narratives from industry practitioners, and the observation that auction sales of distressed ships are significantly more frequent in recessions.
Date:
15 February 2023, 17:00
Venue:
Nuffield College, New Road OX1 1NF
Venue Details:
Staircase L Conference Room
Speaker:
Artur Doshchyn (University of Oxford)
Organising department:
Department of Economics
Part of:
Postdoctoral Fellows Seminar
Booking required?:
Not required
Audience:
Members of the University only
Editor:
Emma Heritage
